In: Finance
Suppose the real rate is 3.3 percent and the inflation rate is 2.4 percent. What rate would you expect to see on a Treasury bill? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places.
(1 + Nominal rate of return) = (1 + Real rate of return)(1 + Inflation rate)
(1 + Nominal rate of return) = (1 + 0.033)(1 + 0.024)
Nominal rate of return = [(1 + 0.033)(1 + 0.024)] - 1
Nominal rate of return = 0.0578 or 5.78%