Question

Define inflation? compare and contrast the real rate of return, the nominal rate of return, and...

Define inflation? compare and contrast the real rate of return, the nominal rate of return, and the ex ante nominal rate of return, using either real-life examples or hypothetical examples.

Homework Answers

Answer #1

Inflation is one of the important conecpt in the economy. Inflation can arise from two situations. First one is the expected rise in the prices of goods and services. Second is the decraese in purcasing power of the currency.

Nominal rate of return = It is the stated return that a financial institutions offers such as bank offering 10% interest rate is the nominal one.

Real rate of return = It is the return after taking inflation into consideration. If the inflationis 2% then the real return will be close to 8%.

Exante nominal return of return = It is realted with future happenings. Nominal is the combination of real and inflation, so if the inflation will increase exante will also increase and vice versa.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose the one year nominal interest rate is 3 percent and that the expected inflation is...
Suppose the one year nominal interest rate is 3 percent and that the expected inflation is equal to 4 percent. The price index over this one year period went from 218 to 223. Compare the ex-ante real rate of interest to the ex-post real rate of interest. Which real rate of interest would you more likely be willing to spend today and which real rate of interest would you more likely be willing to save and why?
Distinguish between the nominal rate and the real rate of interest. How does inflation affect the...
Distinguish between the nominal rate and the real rate of interest. How does inflation affect the real, ex post (after the fact) rate of return to investors?
Tax bracket: 20%, nominal return: 10%, Inflation rate: 6% a.before-tax real rate? b.after-tax real return? c.after-tax...
Tax bracket: 20%, nominal return: 10%, Inflation rate: 6% a.before-tax real rate? b.after-tax real return? c.after-tax nominal return? d.after-tax real interest rate? e.??=????????? ???? × ??? ???????it=inflation rate × tax bracket? f.????? ??? ???? ??????− ????? ??? ???? ???????? ????−??after tax real return- after tax real interest rate-it?
Tax bracket: 20%, nominal return: 10%, Inflation rate: 6% a.before-tax real rate? b.after-tax real return? c.after-tax...
Tax bracket: 20%, nominal return: 10%, Inflation rate: 6% a.before-tax real rate? b.after-tax real return? c.after-tax nominal return? d.after-tax real interest rate? e.??=????????? ???? × ??? ???????it=inflation rate × tax bracket? f.????? ??? ???? ??????− ????? ??? ???? ???????? ????−??after tax real return- after tax real interest rate-it?
3. Distinction Between Real and Nominal Interest Rates a. Distinguish between a nominal versus a real...
3. Distinction Between Real and Nominal Interest Rates a. Distinguish between a nominal versus a real interest rate. b. If a bond gives you a 4% nominal annual interest rate and the inflation rate over the year is 2%, what is the real ex post rate of return you receive? Real Rate You Receive _______________ c. If an investor wants a real rate of return of 2% and expects inflation to be 2% next year, what nominal rate should the...
If the real rate of return is 6% and the nominal interest rate is 11%, what...
If the real rate of return is 6% and the nominal interest rate is 11%, what is the inflation rate? Group of answer choices 4.72% 3.27% 17.66% 4.50%
Compare and contrast the effective rate of exchange with the real exchange rate
Compare and contrast the effective rate of exchange with the real exchange rate
An increase in the rate of inflation will:(multiple choice) increase both the real and the nominal...
An increase in the rate of inflation will:(multiple choice) increase both the real and the nominal rate of interest. increase the nominal interest rate but will not affect the real interest rate. increase the nominal interest rate while lowering the real interest rate. decrease both the real and the nominal rate of interest. increase the real interest rate but not affect the nominal interest rate.
Calculate the nominal rate of interest given a real rate of 8% and an inflation rate...
Calculate the nominal rate of interest given a real rate of 8% and an inflation rate of 2%.
Using a “real world” example (like throwing darts at a dart board), compare and contrast the...
Using a “real world” example (like throwing darts at a dart board), compare and contrast the concepts of "accuracy", "precision”, and "reproducibility". Do NOT simply define the terms.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT