r 1 = 6.5% r 2 = 7.0% r 3 = 7.7% r 4 = 8.5% Assuming a constant real interest ra
ID: 2779422 • Letter: R
Question
r1 = 6.5% r2 = 7.0% r3 = 7.7% r4 = 8.5%
Assuming a constant real interest rate of 2 percent, what are the approximate expected inflation rates for the next four years? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Consider the following spot interest rates for maturities of one, two, three, and four years.r1 = 6.5% r2 = 7.0% r3 = 7.7% r4 = 8.5%
Assuming a constant real interest rate of 2 percent, what are the approximate expected inflation rates for the next four years? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Explanation / Answer
Year Nominal Rate Real rate Approx Inflation Rate =Nominal - real 1.00 6.50% 2% 4.50% 2.00 7% 2% 5.00% 3.00 7.70% 2% 5.70% 4.00 8.50% 2% 6.50%
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