Suppose that for the coming year the force of inflation is forecast to be 4% and...

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Suppose that for the coming year the force of inflation is forecast to be 4% and the force of interest is forecast to be 10%.

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Answer 1

Answer #1

Nominal Rate =10%

Inflation Rtae =4%

Real Rate of return=((1+nominal Rate)/(1+ Inflation Rate ))-1

= ((1+0.10)/(1+0.04))-1

=(1.10/1.04)-1

=5.769%

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Answer 2

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