An investor earned 12 percent last year, a year when actual inflation was 9 percent and was expected to have been 6 percent. What was the investor's expected real rate of return? What was the investor's realized real rate of return? Use both the approximation of the Fisher Equation and the exact Fisher Equation to compare the answers.
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An investor earned 12 percent last year, a year when actual inflation was 9 percent and...
The expected real rate of interest is 0.5%, actual inflation over the last year was -0.05%, and the nominal interest rate is currently 0.28%. According to the Fisher equation, what is the expected inflation (in %) over the next year, dPe? Round to 0.01%. E.g., if your answer is 3.145%, record it as 3.15
The expected real rate of interest is 0.6%, actual inflation over the last year was 3%, and expected inflation over the next year is 7.4%. What is the current level of nominal interest rates (in %) predicted by the Fisher equation? Round to 0.01%. E.g., if your answer is 3.145%, record it as 3.15.
1. You earned 12% on your investments last year. During that time period, inflation averaged 6 percent. What was your real rate of return based on the Fisher formula? 2. A 10 year bond was issued three years ago. It pays 5% coupon semi-annually, and has a yield to maturity of 6%, what is the current market price of the bond? 3. A bond currently has a YTM of 8%. The bond matures in 3 years and pays interest semi-annually....
Last year, you earned a rate of return of 6.42 percent on your bond investments. During that time, the inflation rate was 1.6 percent. What was your real rate of return? 4.74 percent 4.83 percent 4.80 percent 4.71 percent 4.69 percent
You expect inflation over the next year to be 4.6%. Actual inflation over the last year was 0.78%, and the current nominal interest rate is 0.51%. What is your expected real rate of interest (in %)? Round to 0.01%. E.g., if your answer is 3.145%, record it as 3.15.
You are an excellent investor and have averaged a 12% rate of return over the last 20 years. Over the same time period, inflation has averaged 3.2%. What is the real rate of return you have earned on your investments? Show all work.
6. The Fisher effect and the cost of unexpected inflation Suppose the nominal interest rate on savings accounts is 11% per year, and both actual and expected inflation are equal to 5%. Complete the first row of the table by filling in the expected real interest rate and the actual real interest rate before any change in the money supply. Now suppose the Fed unexpectedly increases the growth rate of the money supply, causing the inflation rate to rise unexpectedly from 5% to...
You are considering an investment that will make 8% over the next year. However, inflation is expected to be 3%. According to the Fisher Equation, what is your approximate real return on the investment? You bought a stock last year for $55. During the year, it paid a $2 dividend. You’re selling it today for $62. What is your percent return on this investment?
During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1.5 percent, but people had been expecting 1 percent. This difference between actual and expected inflation___ a) transferred wealth from the borrower to you and caused your after-tax real interest rate to be more than 0.5 percentage points higher than what you had expected. b) transferred wealth from you to the borrower and caused your after-tax real interest rate to be more...
An investment had a nominal return of 10.1 percent last year. The inflation rate was 3.5 percent. What was the real return on the investment?