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How can I find the inflationary premium when I have the money rate of interest and...

How can I find the inflationary premium when I have the money rate of interest and the real rate of interest? Or would I not have enough information?

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Answer #1

Inflation is the difference between money interest rate and the real interest rate .

According to fisher the behaviour of money and real interest rates can be found aS FOLLOWS -:

i = r +

Here i = money/nominal rate of interest

r = real rate of interest

= Inflationary premium.

Therefore = i - r .

In this way you can find your inflationary premium.

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