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How the real interest rate will change

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The two-year interest rate is 13.2% and the expected annual inflation rate is 6.6%.

Problem 1: What is the expected real interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Problem 2: If the expected rate of inflation suddenly rises to 8.6%, what does Fisher's theory say about how the real interest rate will change?

Reference no: EM132920873

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