question archive Suppose the real rate is 2
Suppose the real rate is 2
Subject:BusinessPrice:2.87 Bought7
Suppose the real rate is 2.5 percent and the inflation rate is 4.7 percent. What rate would you expect to see on a Treasury bill?
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Answer:
from fisher equation
(1+R) = (1+r) * (1+h)
R = (1+0.025) * (1+0.047) - 1
R = 1.073 - 1
R = 0.073
R = 7.3 %
