1 a. Suppose the real interest rate is 6 percent and the expected inflation rate is 2 percent. What would you expect the
Posted: Tue Nov 23, 2021 8:53 am
1 a. Suppose the real interest rate is
6 percent and the expected inflation rate is 2 percent. What would
you expect the nominal rate of interest to be? (1.5
points)
1b. Assume that, as of today, the annualized
two-year interest rate is 10 percent and the one-year interest rate
is 8 percent. Use this information to estimate the one-year forward
rate - based only on the pure expectations theory. (show your
work)
6 percent and the expected inflation rate is 2 percent. What would
you expect the nominal rate of interest to be? (1.5
points)
1b. Assume that, as of today, the annualized
two-year interest rate is 10 percent and the one-year interest rate
is 8 percent. Use this information to estimate the one-year forward
rate - based only on the pure expectations theory. (show your
work)