Question

You expect inflation over the next year to be -2.5%. Actual inflation over the last year...

You expect inflation over the next year to be -2.5%. Actual inflation over the last year was 2.59%, and the current nominal interest rate is 6.3%. What is your expected real rate of interest (in %)? Round to 0.01%. E.g., if your answer is 3.145%, record it as 3.15.

Homework Answers

Answer #1

Please upvote if the ans is helpful. In case of doubt,do comment. Thanks.

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
Over the next year, the real interest rate is 2% and the expected inflation rate is...
Over the next year, the real interest rate is 2% and the expected inflation rate is 5%. A. What is the nominal interest rate on a one-year loan? B. Assume that the actual inflation rate turns out to be 3%, instead of 5%. • Who benefits, the lender or the borrower? • What is the realized real interest rate on this loan?
If the real interest rate was large during the last year, then a. inflation is expected...
If the real interest rate was large during the last year, then a. inflation is expected to exceed the nominal interest rate in the future. b. inflation is expected to be less than the nominal interest rate in the future. c. actual inflation was less than the nominal interest rate. d. actual inflation was greater than the nominal interest rate.
Inflation is expected to be 3 percent over the next year. You desire an annual real...
Inflation is expected to be 3 percent over the next year. You desire an annual real rate of return of 2.5 percent on your investments. What market rate of interest would have to be offered on a one-year Treasury security for you to consider making an investment? 1.5 percent 5.5 percent 4.5 percent 0.5 percent None of the above
If workers and firms expect that inflation will be 3 percent next year, and real wages...
If workers and firms expect that inflation will be 3 percent next year, and real wages are not changing over time, by how much will nominal wages increase? A) more than 3 percent B) less than 3 percent C) 3 percent D) depends on actual inflation for next year
The real risk-free rate is 2.5%. Inflation is expected to be 2.5% this year and 4%...
The real risk-free rate is 2.5%. Inflation is expected to be 2.5% this year and 4% during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities? Do not round intermediate calculations. Round your answer to two decimal places. % What is the yield on 3-year Treasury securities? Do not round intermediate calculations. Round your answer to two decimal places. %
You want to have $300,000 in real terms 7 years from now. You expect inflation over...
You want to have $300,000 in real terms 7 years from now. You expect inflation over that time period to be 4% per year. Your investments earn 7% APR (nominal) compounded annually. Based on your expectations, you construct a growing nominal annuity to meet your investment target. What is the nominal cash-flow you would have to deposit in year 5 if inflation turns out to what you expected?
Suppose the underlying real interest rate is 4%. People expect an inflation rate of 2.3% over...
Suppose the underlying real interest rate is 4%. People expect an inflation rate of 2.3% over the next year. a) At what rate will banks set their interest rates? b) Suppose inflation turns out to be 3%. Using your answer from (a), what does the real interest rate turn out to be? c) Explain why unexpectedly high inflation helps borrowers
Due to a recession, expected inflation this year is only 2.5%. However, the inflation rate in...
Due to a recession, expected inflation this year is only 2.5%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 2.5%. Assume that the expectations theory holds and the real risk-free rate (r*) is 3%. If the yield on 3-year Treasury bonds equals the 1-year yield plus 3%, what inflation rate is expected after Year 1? Round your answer to two decimal places.
Due to a recession, expected inflation this year is only 2.5%. However, the inflation rate in...
Due to a recession, expected inflation this year is only 2.5%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 2.5%. Assume that the expectations theory holds and the real risk-free rate (r*) is 3%. If the yield on 3-year Treasury bonds equals the 1-year yield plus 3%, what inflation rate is expected after Year 1? Round your answer to two decimal places.
The real risk-free rate is 3.15%. Inflation is expected to be 2.45% this year, 3.75% next...
The real risk-free rate is 3.15%. Inflation is expected to be 2.45% this year, 3.75% next year, and 2% thereafter. The maturity risk premium is estimated to be 0.05 × (t - 1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note? Do not round intermediate calculations. Round your answer to two decimal places.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT