Homework Answers
According to Fischer Relation,
(1 + Nominal Rate) = (1 + Real Rate) * (1 + Inflation)
(1 + 9.85%) = (1 + Real rate) * (1 + 2.20%)
1 + Real rate = 1.0985/1.0220
1 + Real rate = 1.0749
Real rate = 0.0749 = 7.49%
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