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Ned Stark, a management trainee at a large New York-based bank, is trying to calculate the real rate of interest expected by investors. He notes
Ned Stark, a management trainee at a large New York-based bank, is trying to calculate the real rate of interest expected by investors. He notes that the 3-month T-bill currently yields a nominal annual rate of 3 percent, and consumer prices (i.e., inflation) have been rising steadily at an annual rate of 2 percent for several years. What will be the result of Ned Stark's calculation of the real rate of interest? Calculate the accurate real rate. Do not approximate.
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