What is the expected real interest rate

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Reference no: EM131999529

The two-year interest rate is 13.0% and the expected annual inflation rate is 6.5%.

a. What is the expected real interest rate? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected real interest rate =%

b-1. If the expected rate of inflation suddenly rises to 8.5%, what does Fisher’s theory say about how the real interest rate will change? Real rate decreases Real rate increases Real rate does not change

b-2. What about the nominal rate? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Nominal rate =%.

Reference no: EM131999529

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