An investment offers a 6.5 percent total return over the coming year. Bill Bernanke thinks the total real return on this investment will be only 3.0 percent. What does Bill believe the inflation rate will be over the next year?
Inflation rate can be calculated as follows: | ||||||
Inflation rate | =[(1+Nominal Rate) / (1+ Real Rate)] -1 | |||||
=[(1+6.5%) / (1+ 3%)] -1 | ||||||
3.40% | ||||||
Hence the inflation rate is | 3.40% | |||||
An investment offers a 6.5 percent total return over the coming year. Bill Bernanke thinks the...
An investment offers a 10.5 percent total return over the coming year. Bill Bernanke thinks the total real return on this investment will be only 3.5 percent. What does Bill believe the inflation rate will be over the next year? -6.33% 7.78% 4.73% 6.76% 8.79%
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Please solve, show work, and give detail explanation
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