Question: If the nominal interest rate is 8%, the expected rate of inflation is 5%, and the actual inflation rate is 3%, the ex ante real

If the nominal interest rate is 8%, the expected rate of inflation is 5%, and the actual inflation rate is 3%, the ex ante real rate of interest is

3%.
13%.
5%.
11%.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

You have just taken a one-year loan of $1,000 from your bank. The nominal interest rate is 8%, and you anticipate an inflation rate over the next year of 3%. What is the real interest rate on the...

Q:

7. An equal decrease in all bond interest rates A) increases the price of a five-year bond more than the price of a ten-year bond. B) increases the price of a ten-year bond more than the price of a...

Q:

5. A disinflation monetary policy which reduces the inflation rate to a lower target rate will in the long run tend to result in A. a higher nominal rate of interest B. a lower nominal rate of...

Q:

use the table below to answer questions 1 through 25. pls answer all questions until #37 :) Use information in the table below to answer questions 1 through 25: 1. Nominal GDP in 2000 was a. 28 b. 29...

Q:

If you take out a mortgage with a nominal interest rate of 8 % and the rate of inflation will be 2 % over the lifetime of the mortgage, then your actual real interest rate will be: 6 % 5 % 0 % 1 0 %...

Q:

9997 Amazing Brentwood Inc bought a long-term asset for $100,000. The asset has a 30% CCA rate. At the end of year 5, the firm sold the asset for 25% of its original value. In the year of 2018, The...

Q:

(g) (2 points) Suppose the risk premium in the economy falls. This causes the A. IS curve to shift right and the LM curve to shift up. B. LM curve to shift down and the IS curve to shift left. C. IS...

Q:

In which of the following situations would it be MOST advantageous to be buying bonds? Select one: A . The nominal interest rate is 8 percent and the expected inflation rate is 8 percent. B . The...

Q:

Suppose that the real money demand function is L(Y, r+)= 0.01Y where Y is real output, r is the real interest rate, and is the expected rate of inflation. Real output is constant over time at Y=150....

Q:

(a) If the nominal interest rate is 1% per year and the inflation is 5% per year, what is the growth rate in purchasing power (also referred to as the real interest rate)? (b) if an investor hopes to...

Q:

Michelle took out a $370,000 30-year adjustable rate mortgage with a 3.8% initial 6-month rate. The amortization table for the initial rate period is shown. After the first 6 months, the rate went up...

Q:

Presented below is information related to Kevin and Johnson, Attorneys at Law. Retained earnings, January 1, 2011 ........ $ 23,000 Legal service revenue2011 ........... 350,000 Total expenses2011...

Q:

The S&P 5 0 0 Index is currently at 4 , 0 0 0 . You manage a $ 2 0 million indexed equity portfolio. The S&P 5 0 0 futures contract has a multiplier of $ 5 0 . If you are temporarily bearish on the...

Q:

last two options for the multiple choice are : performance management development A construction equipment manufacturer, Roswell Corporation, is focusing on becoming a leader in sustainability in...

Q:

Distinguish between primary and secondary information sources. Give an example of each. (Objective 3)

Q:

Mary Lous Family Cooking has been operating for 25 years. Several chain restaurants have moved into the area resulting in a highly competitive market.Mary Lous currently owes an $18,750 balance for...

Q:

While working as part of a research team, one of your coworkers tells you that failing to cite sources doesnt constitute plagiarism if youre writing an internal report. Do you agree or disagree? Why?...