Part 1-Treasury bills are currently paying 5 percent and the inflation rate is 2.5 percent. a. What is the approximate real rate of interest? b. What is the exact real rate?

Part 2-Suppose the real rate is 3.8 percent and the inflation rate is 5.4 percent. What rate would you expect to see on a Treasury bill?

Part 3-How does interest rate impact both personal and corporate decision making?

Part 4-How can you tell whether a bond should sell at par, discount, or premium by looking at coupon rate and YTM?

Part 5-Differentiate nominal and real interest rates.