(Real interest rates: approximation method) You are considering investing money in Treasury bills and wondering what...
(Real interest rates: approximation method) You are
considering investing money in Treasury bills and wondering what
the real risk-free rate of interest is. Currently, Treasury bills
are yielding 5.6 % and the future inflation rate is expected to be
3.3 %) per year. Ignoring the cross product between the real rate
of interest and the inflation rate, what is the real risk-free
rate of interest?
The real risk-free rate of interest is nothing____ %. (Round to
one decimal place.)
Homework Answers
Solution:
Real risk free rate of interest = Nominal rate of return - Inflation rate
Real risk free rate of interest = 5.6% - 3.3%= 2.3%
Add Answer to:
(Real interest rates: approximation method) You are
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The following table shows the average nominal interest rates on six-month Treasury bills between 1971 and...
The following table shows the average nominal interest rates on
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for the years 1971 to 1975. (All rates are rounded to the nearest
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Year
Nominal Interest Rate
Inflation Rate
(Percent)
(Percent)
1971
4.5
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1972
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1973
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6.3
1974
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six-month Treasury bills between 1971 and 1975, which determined
the nominal interest rate that the U.S. government paid when it
issued debt in those years. The table also shows the inflation rate
for the years 1971 to 1975. (All rates are rounded to the nearest
tenth of a percent.)
Year
Nominal Interest Rate
Inflation Rate
(Percent)
(Percent)
1971
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1972
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1973
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6.3
1974
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11.0
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