nflation, nominal interest rates, and real rates. From 1991 to 2000, the U.S. economy had an annual inflation rate of around 3.47%. The historical annual nominal isk-free rate for this same period was around 6.27%. Using the approximate nominal interest rate equation and the true nominal interest rate equation, compute the eal interest rate for that decade. What is the estimated real interest rate using the approximate nominal interest rate equation for that decade? % (Round to two decimal places.) What is the true annual real interest rate using the true nominal interest rate equation for that decade? % (Round to two decimal places.)
nflation, nominal interest rates, and real rates. From 1991 to 2000, the U.S. economy had an annual inflation rate of around 3.47%. The historical annual nominal isk-free rate for this same period was around 6.27%. Using the approximate nominal interest rate equation and the true nominal interest rate equation, compute the eal interest rate for that decade. What is the estimated real interest rate using the approximate nominal interest rate equation for that decade? % (Round to two decimal places.) What is the true annual real interest rate using the true nominal interest rate equation for that decade? % (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
Section: Chapter Questions
Problem 1PS
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![**Inflation, nominal interest rates, and real rates.** From 1991 to 2000, the U.S. economy had an annual inflation rate of around 3.47%. The historical annual nominal risk-free rate for this same period was around 6.27%. Using the approximate nominal interest rate equation and the true nominal interest rate equation, compute the real interest rate for that decade.
1. **What is the estimated real interest rate using the approximate nominal interest rate equation for that decade?**
\[ \_\_ \% \] (Round to two decimal places.)
2. **What is the true annual real interest rate using the true nominal interest rate equation for that decade?**
\[ \_\_ \% \] (Round to two decimal places.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4d76a024-bd52-442b-a28d-e2cd86a37299%2F6430ed76-1c87-4a2a-bb79-fb1b4dda0aa9%2F88q43pp_processed.png&w=3840&q=75)
Transcribed Image Text:**Inflation, nominal interest rates, and real rates.** From 1991 to 2000, the U.S. economy had an annual inflation rate of around 3.47%. The historical annual nominal risk-free rate for this same period was around 6.27%. Using the approximate nominal interest rate equation and the true nominal interest rate equation, compute the real interest rate for that decade.
1. **What is the estimated real interest rate using the approximate nominal interest rate equation for that decade?**
\[ \_\_ \% \] (Round to two decimal places.)
2. **What is the true annual real interest rate using the true nominal interest rate equation for that decade?**
\[ \_\_ \% \] (Round to two decimal places.)
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