In: Finance
Treasury bills are currently paying 6.17 percent and the inflation rate is 4.36 percent. What is the real rate of interest?
approximate real rate of return = treasury bill - inflation rate
=6.17%- 4.36%
=1.81%
Exact real rate =[ (1+treasury bill )/(1+ inflation rate ) ]-1
=[ (1+0.0617)/(1+0.0436)]-1
=(1.0617/1.0436)-1
=1.0173438-1
= 0.01734 or 1.73%