2.A bond offers a real rate of interest of 2.0% per annum. If expected inflation is...

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2.A bond offers a real rate of interest of 2.0% per annum. If expected inflation is...

2.A bond offers a real rate of interest of 2.0% per annum. If expected inflation is 3.0% per annum, the nominal rate of interest per annum, according to the exact Fisher equation, is (in percentage to nearest two decimal places; do not use the percentage sign eg 2.881% is 2.8

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Answer 1

Answer #1

We see that the nominal rate of interest per annum is given as equal to =1.02*1.03-1=5.06%

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Answer 2

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