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Using the exact Fisher equation, the nominal rate of interest on a bond with a real...

Using the exact Fisher equation, the nominal rate of interest on a bond with a real rate of 8.9% p.a. and expected inflation of 2.6% p.a. is closest to (in percentage to nearest two decimal places; do not use the percentage sign eg 2.881% is 2.88): Answer:

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Answer #1
(1 + Nominal Rate of Interest) = (1 + Real Rate of Interest)*(1+Inflation Rate)
(1 + Nominal Rate of Interest) = (1 + 8.9%)*(1+2.6%)
(1 + Nominal Rate of Interest) = (1.089)*(1.026)
(1 + Nominal Rate of Interest) = 1.117314
Nominal Rate of Interest = 1.117314 - 1
Nominal Rate of Interest = 0.117314
Nominal Rate of Interest = 11.7314%
Nominal Rate of Interest = 11.73
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