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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.)

Solutions

Expert Solution

Real rate of return = Nominal rate of return - Inflation rate

3.4% = Normal rate of return - 4.6%

Normal rate of Return = 8%

One need to earn get Nomainal return @ 8% in order to get 3.4% of real return in a case where the inflation rate is 4.6%

jeff jeffy answered 2 years ago
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