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3. Distinction Between Real and Nominal Interest Rates a. Explain the difference between a nominal versus a real interest rate. b. If the 1-year Treasury
3. Distinction Between Real and Nominal Interest Rates a. Explain the difference between a nominal versus a real interest rate. b. If the 1-year Treasury bill rate in July 2022 was 3.11% and the inflation rate expected over year is 9.00% what is the expected real rate of return for an investor who purchased the 1-year Treasury bill? Expected Real Rate of Return c. If an investor desires a real rate of return of 2% on a 1-year Treasury bill and expects inflation to be 9.00% next year, what nominal rate would be required on the 1-year Treasury bill for the investor to get the desired 2% real rate of return? Nominal Rate Investor Demands
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