Inflation, nominal interestrates, and real rates.The Republic of New SouthBrazillia, asmall, developing island country in South CentralAmerica, is experiencing a very high inflation rate at this time. The annual inflation rate is 40%. If the real rate of interest is 1.8%, what nominal interest rates must the residents of New South Brazillia get to stay ahead of inflation and still have a reward forwaiting? Use the approximate nominal interest rate equation and the true nominal interest rate equation to determine the rates.

Using the approximate nominal interest rateequation, what nominal interest rate must the residents of New South Brazillia get to stay ahead of inflation and still have a reward forwaiting?

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% (Round to two decimalplaces.)