Treasury bills are currently paying 6 percent and the inflation rate is 3.10 percent. What...

Question

Question

Treasury bills are currently paying 6 percent and the inflation rate is 3.10 percent.

What is the approximate real rate of interest?

What is the exact real rate?

Answer 1

✔ Recommended Answer

Answer #1

approximate real rate = nominal - iflation = 6-3.1 = 2.9%

real rate = (nominal-inflation)/(1+inflation) = (.06-.031)/(1.031) = 2.81%

Answer 2

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