Question
In: Finance
If the nominal rate of interest is 13.02% and the real rate of interest is 8.01%, what is the expected rate of inflation?
If the nominal rate of interest is 13.02% and the real rate of interest is 8.01%, what is the expected rate of inflation?
Solutions
Expert Solution
Based on Fischer Relation,
(1 + Nominal rate) = (1 + Real Rate) * (1 + Inflation)
(1 + 13.02%) = (1 + 8.01%) * (1 + Inflation)
1 + Inflation = 1.1302/1.0801
1 + Inflation = 1.0464
Inflation = 0.0464 = 4.64%
jeff jeffy answered 2 years agoRelated Solutions
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Subject: Finance
Could you explain the relationship among the real interest rate, nominal interest rate, and inflation rate?...
Could you explain the relationship among the real interest rate,
nominal interest rate, and inflation rate? How can we get the
approximate value of the real interest rate (show the formula)?
Could you also give me a real-life example to show this
relationship? (For example, recall the one I showed you about
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