9. Suppose the nominal rate you see on a Treasury bill is 4.31 percent and its real rate is 2.5 percent, what is the inflation rate?
1.77% Please Show All Work
Based on Fischer relation,
(1 + Nominal rate) = (1 + Real rate) * (1 + Inflation)
{In some texts, you would find this relation as Nominal Rate = Real Rate + Inflation. This is an approximate version of the above mentioned actual relation}
(1 + 4.31%) = (1 + 2.5%) * (1 + Inflation)
(1 + Inflation) = 1.0431/1.025 = 1.01766
Inflation = 0.01766
Inflation = 1.77%
9. Suppose the nominal rate you see on a Treasury bill is 4.31 percent and its...
Suppose the nominal rate you see on a Treasury bill is 4.31 percent and its real rate is 2.5 percent, what is the inflation rate?
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14 Please show your work so I can learn
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