Determine the expected real interest rate

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The two-year interest rate is 11.4% and the expected annual inflation rate is 5.7%.

a.What is the expected real interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Expected real interest rate: %

b. If the expected rate of inflation suddenly rises to 7.7%, what will be the new nominal rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Nominal rate: %

Reference no: EM132034851

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