Inflation, nominal interest rates, and real rates. The Republic of New South Brazillia, a small, developing island country in South Central America, is experiencing a very high inflation rate at this time. The annual inflation rate is 32%. If the real rate of interest is 1.5%, what nominal interest rates must the residents of New South Brazillia get to stay ahead of inflation and still have a reward for waiting? Use the approximate nominal interest rate equation and the true nominal interest rate equation to determine the rates. Using the approximate nominal interest rate equation, what nominal interest rate must the residents of New South Brazillia get to stay ahead of inflation and still have a reward for waiting? % (Round to two decimal places.) Using the true nominal interest rate equation, what nominal interest rate must the residents of New South Brazillia get to stay ahead of inflation and still have a reward for waiting? % (Round to two decimal places.)

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
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**Inflation, Nominal Interest Rates, and Real Rates**

The Republic of New South Brazillia, a small, developing island country in South Central America, is experiencing a very high inflation rate at this time. The annual inflation rate is 32%. If the real rate of interest is 1.5%, what nominal interest rates must the residents of New South Brazillia get to stay ahead of inflation and still have a reward for waiting? Use the approximate nominal interest rate equation and the true nominal interest rate equation to determine the rates.

1. **Using the approximate nominal interest rate equation, what nominal interest rate must the residents of New South Brazillia get to stay ahead of inflation and still have a reward for waiting?**

   \(\Box\)% (Round to two decimal places.)

2. **Using the true nominal interest rate equation, what nominal interest rate must the residents of New South Brazillia get to stay ahead of inflation and still have a reward for waiting?**

   \(\Box\)% (Round to two decimal places.)

*Note: There are no graphs or diagrams in this content.*
Transcribed Image Text:**Inflation, Nominal Interest Rates, and Real Rates** The Republic of New South Brazillia, a small, developing island country in South Central America, is experiencing a very high inflation rate at this time. The annual inflation rate is 32%. If the real rate of interest is 1.5%, what nominal interest rates must the residents of New South Brazillia get to stay ahead of inflation and still have a reward for waiting? Use the approximate nominal interest rate equation and the true nominal interest rate equation to determine the rates. 1. **Using the approximate nominal interest rate equation, what nominal interest rate must the residents of New South Brazillia get to stay ahead of inflation and still have a reward for waiting?** \(\Box\)% (Round to two decimal places.) 2. **Using the true nominal interest rate equation, what nominal interest rate must the residents of New South Brazillia get to stay ahead of inflation and still have a reward for waiting?** \(\Box\)% (Round to two decimal places.) *Note: There are no graphs or diagrams in this content.*
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