You observe that the inflation rate in the United States is 1.1 percent per year

Question

You observe that the inflation rate in the United States is 1.1 percent per year and that T-bills currently yield 1.6 percent annually.

What do you estimate the inflation rate to be in Australia, if short-term Australian government securities yield 6 percent per year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place (e.g., 32.1).)

What do you estimate the inflation rate to be in Canada, if short-term Canadian government securities yield 9 percent per year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place (e.g., 32.1).)

What do you estimate the inflation rate to be in Taiwan, if short-term Taiwanese government securities yield 11 percent per year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place (e.g., 32.1).)

You observe that the inflation rate in the United States is 1.1 percent per year and that T-bills currently yield 1.6 percent annually.

Explanation / Answer

Yield in Us - Inflation in Us = Yield in ? - Inflation In? (1.6-1.1 = 0.5)

Australia = 6-0.5 = 5.5

Canada = 9-0.5= 8.5

Taiwan = 11-0.5 = 10.5

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