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The two-year interest rate is 11.2% and the expected annual inflation rate is 5.6%. a. What is the expected real interest rate? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected real interest rate 5.30 % b-1. If the expected rate of inflation suddenly rises to 7.6%, what does Fisher’s theory say about how the real interest rate will change? Real rate increases Real rate decreases Real rate does not change b-2. What about the nominal rate?

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Financial Management, Finance

Category:- Financial Management
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