Answered: inflation

Business

Accounting

inflation

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter9: Forecasting Exchange Rates

Section: Chapter Questions

Problem 5BIC

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Question

#68

The risk-free rate is

3.7%,

and expected inflation is

2.4%.

If inflation expectations change such that future expected inflation falls to

2.1%,

what will the new risk-free rate be?

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Similar questions

6
If the expected rate of inflation was 3% and the actual rate was 6.2%; the systematic response coefficient from inflation, βI, would result in a change in any security return of ___ βI. Question 32 options: a) 9.2 b) 3.2 c) -3.2 d) 3.0 e) 6.2
If the risk-free rate is 2.2 percent, the inflation rate is 1.9 percent, and the market rate of return is 6.8 percent, what is the amount of the risk premium on a U.S. Treasury bill? O 2.8% O 0.5% O 1.7% « > A Moving to another question will save this response.
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1. Assume that you expect the economy's rate of inflation to be 3 percent, giving an RFR of 6 percent and a market return (RM) of 12 percent. a. Draw the SML under these assumptions. b. Subsequently, you expect the rate of inflation to increase from 3 percent to 6 percent. What effect would this have on the RFR and the RM? Draw another SML on the graph from Part a. c. Draw an SML on the same graph to reflect an RFR of 9 percent and an RM of 17 percent. How does this SML differ from that derived in Part b? Explain what has transpired.
Question 9 If the expectations theory of the term structure of interest rates is correct and the other term structure theories are invalid, and if we observe a downward-sloping yield curve, which of the following is a true statement? Investors expect short-term rates to be constant over time. Investors expect short-term rates to increase in the future. Investors expect short-term rates to decrease in the future. Investors expect short-term rates to be unchanged in the future.
M1
10. the math of interest. please indicate if you are unsure or totally sure about the answer
K If the natural unemployment rate increases and the expected inflation rate remains constant, then A. neither the long-run Phillips curve nor the short-run Phillips curve shifts B. the long-run Phillips curve shifts rightward and the short-run Phillips curve shifts rightward C. the long-run Phillips curve shifts rightward and the short-run Phillips curve does not shift D. the short-run Phillips curve shifts rightward and the long-run Phillips curve does not shift
As the inflation rate increases, Blank______. Multiple choice question. the risk-free rate decreases the required rate of return decreases the risk-free rate increases the discount rate increases
which one is correct please suggest? QUESTION 35 The risk-free rate of return can be thought of as consisting of ____ and ____. a. unanticipated inflation; bond default premium b. a zero beta component; an expectation premium c. a real rate of return; an inflation premium d. a real rate of return; a default premium