Treasury bills are currently paying 6 percent and the inflation rate is 3.4 percent. |
a. |
What is the approximate real rate of interest? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
b. | What is the exact real rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
Approximate real rate=Nominal rate-Inflation rate
=6-3.4=2.6%
Exact real rate=[(1+nominal rate)/(1+inflation rate)]-1
=[(1+0.06)/(1+0.034)]-1
=2.51%(Approx).
Treasury bills are currently paying 6 percent and the inflation rate is 3.4 percent. a. What...
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treasury bills are currently paying 6 percent and the inflation rate is 3.1 percent