Inflation, nominal interest rates, and real rates. Given the following information,estimate the nominal rate with the approximate nominal interest rate equation andthe true nominal interest rate equation for each set of real and inflation rates......First, fill in the approximate nominal interest rate in the following table: (Round to two decimal places.)ApproximateReal RateInflation RateNominal Rate4.5%7.0%% ApproximateTrueReal RateInflation RateNominal RateNominal Rate4.5%7.0%?8.0%12.0%?3.0%2.0%?1.0%3.5%?

Given: Real rate Inflation rate 4.50% 7% 8% 12% 3% 2% 1% 3.50%

Answered: Inflation, nominal interest rates, and…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

(Related to Checkpoint 9.6) (Inflation and interest rates) What would you expect the nominal rate of interest to be if the real rate is 3.7 percent and the expected inflation rate is 6.8 percent? The nominal rate of interest would be %. (Round to two decimal places.)
Treasury bills are currently paying 8 percent and the inflation rate is 3 percent. What is the approximate real rate of interest? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the exact real rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Find the effective rate of interest corresponding to a nominal rate of 5.5% compounded seminannually. Answer choices: 5.645% 5.91% 5.558% 5.569%
You observe that the current interest rate on short-term U.S. Treasury bills is 4.86 percent. You also read in the newspaper that the GDP deflator, which is a common macroeconomic indicator used by market analysts to gauge the inflation rate, currently implies that inflation is 1.65 percent. What is the approximate real rate of interest on short-term Treasury bills? (Enter your answer as a percent rounded to 2 decimal places.)
The real rate is 4 percent and the inflation rate is 5.6 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, e.g., 32.16.)
(Related to Checkpoint 9.6) (Inflation and interest rates) What would you expect the nominal rate of interest to be if the real rate is 3.7 percent and the expected inflation rate is 7.2 percent? ______________________________________________________________________ The nominal rate of interest would be __________%. (Round to two decimal places.)
If Treasury bills are currently paying 6.25 percent and the inflation rate is 1.8 percent, what is the approximate and the exact real rate of interest? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Approximate real rate Exact real rate % %
If the rate of inflation is 5.00%, what nominal interest rate is necessary for you to earn a 3.00% real interest rate on your investment? (Note: Be careful not to round any intermediate steps less than six decimal places.) The nominal interest rate needed for your investment is %. (Round to two decimal places.)
(Related to Checkpoint 9.6) (Inflation and interest rates) What would you expect the nominal rate of interest to be if the real rate is 4.3 percent and the expected inflation rate is 6.9 percent? The nominal rate of interest would be %. (Round to two decimal places.) C
What is the real interest rate given a nominal rate of 8.7% and an inflation rate of 1.5%? A. 11.3% B. 8.5% C. 7.1% D. 9.9%
Solve for the unknown interest rate in each of the following (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.):
Using the following information, determine the real rate of interest: Rate % inflation 0.69 T-bill 5.00 10y T-Bond 6.00 10y AAA Corporate 6.41 10y AA Corporate 8.24

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