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Inflation, nominal interest rates, and real rates. The Republic of New South Brazillia, a small, developing island country in South Central America, is experiencing a
Inflation, nominal interest rates, and real rates. The Republic of New South Brazillia, a small, developing island country in South Central America, is experiencing a very high inflation rate at this time. The annual inflation rate is 40%. If the real rate of interest is 2%, what nominal interest rates must the residents of New South Brazillia get to stay ahead of inflation and still have a reward for waiting? Use the approximate nominal interest rate equation and the true nominal interest rate equation to determine the rates. Using the approximate nominal interest rate equation, what nominal interest rate must the residents of New South Brazillia get to stay ahead of inflation and still have a reward for waiting? % (Round to two decimal places.) Using the true nominal interest rate equation, what nominal interest rate must the residents of New South Brazillia get to stay ahead of inflation and still have a reward for waiting? 1% (Round to two decimal places.)
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