45. Nominal rate where RR is 2% & IR is 7% is"9.14%" and Real Rate where Inflation rate is 11% is -1.68%

A) Under what condition will the real rate equal the nominal rate?

B) If an investors inflation expectations are correct, what is the implication for the relationship between the ex-ante desired real rate of return and the ex-post realized rate of return?

C) What if the investors ex-ante inflationary expectations are higher than the actual ex-post rate of inflation? What is the implication for the relationship between the ex-ante desired real rate of return and the ex-post realized rate of return?

D) What if the investors ex-ante inflationary expectations are lower than the actual ex-post rate of inflation? What is the implication for the relationship between the ex-ante desired real rate of return and the ex-post realized rate of return?

2.0000% 7.0000% K* E(I) Kif A(I) desired ex-ante real return after inflation ex-ante expected inflation ex-ante desired nominal rate of return ex-post actual inflation ex-post real inflation adjusted return 9.1400% 11.0000% Kes -1.6757% ex-ante Krf = K* + E(I) + (K*)( E(I)) Kif K* Kif 0.0200 Kif 0.0914 Kif 9.1400% E(I) 0.0700 [ K* 0.0200 E()] 0.0700 What investor would demand to protect against expecterd inflation + A(1) 0.1100 + ex-post Krf=Kes* + A(I) + (Ker*)(AI) Kif ? Kes* 0.0914 ? Kes -0.0186 -0.0186 -0.01676 ? Kes* -1.6757% [ ?K* ? Ke* ?K * X A(I) ] 0.1100 0.1100 + ? Kes ? Ke (1.1100) What investor would actually receive after adjusting for loss of purchasing power due to actual inflation