. 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 on January 1, 2023 was 4.34% and the inflation rate expected over year is 2.90% 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 2.9)% over 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 _______________