The two-year interest rate is 11.2% and the expected annual inflation rate is 5.6%.   a.What is the expected real interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)           b-1. If the expected rate of inflation suddenly rises to 7.6%, what does Fisher’s theory say about how the real interest rate will change?   multiple choice Real rate increases Real rate does not change Real rate decreases     b-2. If the expected rate of inflation suddenly rises to 7.6%, what will be the new nominal rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.