1.(Inflation and interestrates)

You're considering an investment that you expect will produce a return of 9 percent next year, and you expect that your real rate of return on this investment will be 4

percent. What do you expect inflation to be next year? The expected inflation rate next year will be?

(Round to two decimal places.)

2.(Inflation and interest rates)

What would you expect the nominal rate of interest to be if the real rate is

4.2 percent and the expected inflation rate is 6.5 percent? The nominal rate of interest is?

(Round to two decimal places.)