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Category > Business & Finance Posted 13 Jul 2017 My Price 9.00

1. The one-year spot interest rate is r 1 = 5%

1. The one-year spot interest rate is r 1 = 5% and the two-year rate is r 2 = 6%. If the expectations theory is correct, what is the expected one-year interest rate in one year’s time?

2. The two-year interest rate is 10% and the expected annual inflation rate is 5%.

a. What is the expected real interest rate?

b. If the expected rate of inflation suddenly rises to 7%, what does Fisher’s theory say about how the real interest rate will change? What about the nominal rate?

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Status NEW Posted 13 Jul 2017 03:07 PM My Price 9.00

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