Question
In: Finance
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 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
buying apples).
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nominal interest rate and the inflation rate. What are the impacts
of these on the economy?
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