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For 1,000 bags of cement from your friend, you promise to return 1,100 bags in one year. i. What is the expected real return %
For 1,000 bags of cement from your friend, you promise to return 1,100 bags in one year. i. What is the expected real return % to your friend? ii. You actually did not borrow 1,000 bags of cement from your friend, since she does not deal in cement. Instead, you borrowed enough cash from her to buy 1,000 bags of cement at GH 38 each. If you pay her back enough GH to buy 1,100 bags of cement that you promised but cement prices have gone up by 20%, what is her nominal return %? iii. Show that Fisher Effect holds.
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