Question
In: Finance
if the current inflation rate is 2.0% then the nominal rate necessary for you to earn...
if
the current inflation rate is 2.0% then the nominal rate necessary
for you to earn a 5.3% real interest rate on the investment is
closest to
8.9% 10.23% 15.11% 7.41% 9.41%
The
answer choices are at the bottom
Solutions
Expert Solution
According to the Fisher Equation
Nominal Interest rate = [(1+Inflation rate)* (1+Real Interest rate)] -1
= [(1+2%)*(1+5.3%)] -1
= (1.02)*(1.053) -1
= 1.07406 -1
= 0.07406 or 7.41%[Rounded to two decimals]
So, Nominal Interest rate = 7.41%
jeff jeffy answered 2 years agoRelated Solutions
Assume that the current annual inflation rate in our country is 2.0% and the unemployment rate...
Assume that the current annual inflation rate in our country is
2.0% and the unemployment rate is 4.4%.
If you were an advisor of President Trump and Treasury Secretary
Steven Mnuchin, and today you were asked to recommend only ONE of
the following objectives: lower inflation OR lower unemployment,
which would you choose? Explain why you selected one over the
other.
If the rate of inflation is 4.6%, what nominal interest rate isnecessary for you to...
If the rate of inflation is 4.6%, what nominal interest rate is
necessary for you to earn a 3.4% real interest rate on your
investment? (Note: Be careful not to round any intermediate steps
less than six decimal places.)
151) If the nominal interest rate in an economy is 6% and the inflation rate in...
151) If the nominal interest rate in an economy is 6% and the
inflation rate in the economy is 10%, then the real interest rate
is:
151) A) 10%. B) -6%. C) -4%. D) 6%.
152) The federal funds rate is a:
152) A) short-term real interest rate. B) short-term nominal
interest rate. C) long-term nominal interest rate. D) long-term
real interest rate.
153) Which of the following equations is correct?
153) A) Realized real interest rate = nominal interest...
The rate of growth of nominal GDP is 10 percent. The rate of inflation rate is...
The rate of growth of nominal GDP is 10 percent. The rate of
inflation rate is 5 percent. The rate of growth of the population
is 1%. What is the rate of growth or real GDP per capita? (b) What
is the problem with using GDP (and GDP per capita) as a measure of
economic performance and welfare?
Could you explain the relationship between the real interest rate, nominal interest rate, and inflation rate?...
Could you explain the relationship between 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?
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
buying apples).
A. The real risk-free rate is 2.0% and inflation is expected to be 3.25% for the...
A. The real risk-free rate is 2.0% and inflation is expected to
be 3.25% for the next 2 years. A 2-year Treasury security yields
6.05%. What is the maturity risk premium for the 2-year security?
Round your answer to one decimal place.
%
B. An analyst is evaluating securities in a developing nation
where the inflation rate is very high. As a result, the analyst has
been warned not to ignore the cross-product between the real rate
and inflation. A...
If the nominal interest rate is 0.09 and the (expected) inflation rate is 0.03, what is...
If the nominal interest rate is 0.09 and the (expected)
inflation rate is 0.03, what is the real interest rate? (Answer as
a decimal.)
Consider an economy with only one good: corn. In 2010 the price
of corn was 6.08 and in 2011 the price was 7.9. What was the
inflation rate? (Answer as a decimal. Round to three decimal
places.)
Let NGDP be 1,825 and the money supply be 474. What is velocity?
(Round to one decimal place.)
If the nominal interest rate is 0.09 and the (expected) inflation rate is 0.03, what is...
If the nominal interest rate is 0.09 and the (expected)
inflation rate is 0.03, what is the real interest rate? (Answer as
a decimal.)
Consider an economy with only one good: corn. In 2010 the price
of corn was 6.08 and in 2011 the price was 7.9. What was the
inflation rate? (Answer as a decimal. Round to three decimal
places.)
Let NGDP be 1,825 and the money supply be 474. What is velocity?
(Round to one decimal place.)
suppose the nominal risk-free rate of return in the U.S. is 2.8% and the inflation rate...
suppose the nominal risk-free rate of return in the U.S. is 2.8%
and the inflation rate is 1.50%. what is the required rate of
return ( or interest rate on a BBB-rated corporate bond with a
default risk premium (or default spread) of 1.85%? ignore the
liquidity and maturity premiums.
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Compare the MOSFET, JFET , and BJT and identify the reasons these devices behave differently. What...
- How would you use SAS Enterprise Miner to create a neural network model of your example?
- Explain the use of neural networking modeling in predictive analytics.
- Current Market Mix of Netflix, as detail as possible, please.
- This is all one question, thank you so much in advance! You must evaluate a proposal...
- X Company is considering the purchase of a new processor that costs $200,000. Shipping and setup...
- There are a large number of tasks involved in information technology and programming, and many of...
ADVERTISEMENT