The expected inflation rate is 2.1%. What nominal interest rate is necessary to earn a real return of 1.5% on an investment?

Q: At an annual inflation rate of 7.2%, how long will it take the Consumer Price Index (CPI) to double?

A: Assuming that CPI is equal to C0.

Q: (Inflation and interest rates​) What would you expect the nominal rate of interest to be if the real…

A: The formula to calculate nominal rate of interest is: (1 + Nominal rate of return) = (1 + Real rate…

Q: ​(Inflation and interest rates​) What would you expect the nominal rate of interest to be if the…

A: The nominal rate of interest is the rate that includes the inflation effect in the interest rate.…

Q: (Inflation and interest rates) What would you expect the nominal rate of interest to be if the real…

A: To calculate the nominal rate of interest we will use the below formulaNominal rate of return =…

Q: what should the nominal rate of interest​ be?

A: Nominal interest rate (NIR) refers to a interest rate which an investor is expect from his…

Q: (Inflation and interest rates) Assume the expected inflation rate is 4.1 percent. If the current…

A: A financial product's declared or marketed interest rate, such as that on a loan, bond, or savings…

Q: 6. The Fisher effect and the cost of unexpected inflation Suppose the nominal interest rate on car…

A: real rate = nominal rate - inflation

Q: Please answer quickly and correctly Suppose that the general inflation rate is 3% and the real…

A: As opposed to real interest rates and effective interest rates, nominal interest rates are the…

Q: i>0 is the effective annual interest rate, and r>0 is the annual inflation rate (with i>r). If i…

A: We have to find out if the real rate of return doubles, if nominal rate and inflation both doubles.

Q: What would you expect the nominal rate of interest to be if the real rate is 5 percent and the…

A: We require to compute the nominal rate of interest in this question.

Q: If the rate of inflation is 4.6%, what nominal interest rate is necessary for you to earn a 2.2%…

A: The nominal interest rate is an interest rate before considering the inflation rate. The formula for…

Q: uppose the real risk-free rate is 3.00%, the average expected future inflation rate is 6.60%, and a…

A: Here, Details of Ques-A: Real Risk Free Interest Rate is 3% Inflation Rate is 6.60% Maturity Risk…

Q: Suppose the real risk-free rate is 2.50% and the future rate of inflation is expected to be constant…

A: Treasury securities are risk free money market instruements issued by federal bank and rate of these…

Q: If an ARM is priced with an initial interest rate of 8 percent and a margin of 2 percent (when the…

A: Introduction: The term ARM is used to refer the adjustable rate mortgages. As the name indicates…

Q: You want to earn a real rate of return of 6.50% at a time when the inflation rate is 3.25%. What is…

A: Interest refers to the amount charged by the lender on the lent amount. The borrower of the loan is…

Q: You know that the stated rate of return is not what you really earned. If the inflation rate last…

A: The inflation rate refers to the rate at which the value of the currency decreases over time and the…

Q: If the risk-free rate is 2.2 percent, the inflation rate is 1.9 percent, and the market rate of…

A: The risk-free rate refers to the return rate of an investment that is not at all or at least risky…

Q: 4) If we require a 10% real return and we expect inflation to be 8%, what is the nominal rate based…

A: Real rate of return is inflation adjusted return after adjustment of inflation from the nominal…

Q: Suppose that for the coming year, the inflation is forecast at an effective annual rate of 1.27%. If…

A: The issue is with finance, more especially with the computation of real interest rates or interest…

Q: Suppose the real rate is 3.1 percent and the inflation rate is 4.7 percent. What rate would…

A: Fisher equation is used to calculate the expected return on treasury bill.

Q: What would you expect the nominal rate of interest to be if the real rate is 5.3 percent and the…

A: Nominal Interest Rate: It refers to the rate of interest that does take into consideration the…

Q: A real risk-free rate is currently -1.0%. A broker at INV Securities, has given you the following…

A: Information on the rates:Inflation premium = 6%Liquidity premium = 2%Maturity risk premium =…

Q: If the rate of inflation is 4.8%, what nominal interest rate is necessary for you to earn a 2.2%…

A: Inflation rate = 4.8% Real rate = 2.2%

Q: What is the amount of the risk premium on a U.S. Treasury bill if the inflation rate is 2.6 percent,…

A: Market rate = 7.4% Inflation rate = 2.6% Risk free rate = 3.1%

Q: The annual inflation rate is expected to be 4.78% and the nominal (annual) interest rate is 5.75%.…

A: Inflation rate (π) =4.78% Nominal rate of interest (i)=5.75%. Using Fischer equation, real interest…

Q: Suppose 1-year T-bills currently yield 7.40% and the future inflation rate is expected to be…

A: The theoretical rate of return on an investment or loan that bears no danger of financial loss owing…

Q: 20. Suppose the interest rate on a 1-year T-bill is 5.5% and that on a 2-year T-bill is 7.5%.…

A: A theory that helps to evaluate future short-term interest rates by using the current long-term…

Q: If the real rate of interest is 8% and the nominal rate of interest is 28%, then the rate of…

A: Real Rate of Interest = Nominal Rate of Interest - Rate of Inflation

Q: Inflation and Nominal Returns Suppose the real rate is 2.25 percent and the inflation rate is 3.2…

A: Nominal Rate = Real Rate + Inflation Rate

Q: What is the nominal rate of return on an investment if the real rate of return is 3.41% and the…

A: Real Rate of Return = 3.41%Inflation Rate = 2.50%

Q: The Fisher effect and the cost of unexpected inflation Suppose the nominal interest rate on car…

A: Answer a) Computation of Expected real interest rate and Actual real interest rate before increase…

Q: The required return of a risk-free asset can be approximated by The pure time value of money and…

A: NO risk assets are called risk free assets.

Q: The expected inflation rate is 26.5%. If the current real rate of interest is 21%, what should the…

A: Nominal rate of interest is calculated using following equation Nominal interest rate = [(1+Real…

Q: Suppose that the general inflation rate is 5% and the real interest rate is 3%. Find the market…

A: Inflation can be defined as the increase in general price levels in the market. Inflation reduces…

Interest Rate

When you deposit your money with the bank, the deposit earns you some extra money at the end of the specific period – something more than what you deposited. That amount of money that the bank pays you for keeping the money with the bank is the “interest” and the percentage at which the bank pays you for your amount is called the “interest rate”.