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What is an appropriate three year interest

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Reference no: EM132506037

This is a question on a past exam paper for finance (financial markets institutions and money) i was wondering if i had done it correctly and what workings i would need to show to answer it.

1. a. A bank which is considering a fixed rate, three year loan to a customer requires a 2% per annum real return and makes the following inflation rate forecasts: Year 1: 1.5%

Year 2: 1.2%

Year 3: 2.0%

What is an appropriate three year interest rate for the loan

Reference no: EM132506037

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