question archive The real rate is 2
The real rate is 2
Subject:FinancePrice:2.87 Bought7
The real rate is 2.8 percent and the nominal rate is 6.3 percent. What is the expected inflation premium? Please use the exact (multiplicative) formulation.
A.2.63%
B.3.40%
C.4.18%
D.4.96%
E.5.74%
F.6.52%
G.7.30%
H.8.07%
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Answer:
B. 3.40%
Expected inflation premium = ((1 + Nominal rate) / (1 + Real rate)) - 1
= ((1 + 6.3%) / (1 + 2.8%)) - 1
= 1.034047 - 1
= 0.034047 or 3.40%
