In: Finance
Treasury bills are currently paying 9 percent and the inflation rate is 3.1 percent. |
What is the approximate real rate of interest? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
Approximate real rate | % |
What is the exact real rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
Exact real rate | % |
a. The rate is computed as follows:
= 9% - 3.1%
= 5.9%
b. The exact real rate is computed as follows:
= [ (1 + 0.09) / (1 + 0.031) ] - 1
= 5.72% Approximately