Question
Inflation is expected to be 3% over the next year. You desire an annual real rate or return of 2.5% on your investments. . a.
Inflation is expected to be 3% over the next year. You desire an annual real rate or return of 2.5% on your investments.
.
a. What market rate of interest would have to be offered on a one-year Treasury security for you to consider making an investment?
b. A one-year corporate debt security is being offered at two percentage points over the one-year Treasury security rate that meets your requirement in (a). What pointswould be the market interest rate on the corporate security?
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Personal Finance
Authors: Jeff Madura, Hardeep Singh Gill
3rd Canadian Edition
978-0133035575, 133035573, 978-0133970524, 133970523, 978-0134040042
