Q1: In class we discussed the interest rate theory of economist Irving Fisher. An important concept advanced by Fisher was that of Real interest rates as opposed to Nominal interest rates. How did Fisher define the difference between Real rates and Nominal rates?

Q2: Lets say that a certain corporate bond is selling on the New York Bond Exchange at a price that produces an expected return of 6.2%. Applying the logic of the Fisher Model as explained in class, you estimate that this 6.2% rate represents the combined effect of a 0.5% Time Value of Money (TV), a 2.0% required return to compensate of expected price inflation (Ia), and a 3.7% premium for various sources of Risk (RP). Use the formula derived in class to estimate the Real expected rate of return on this bond in accordance with Fishers theory. [4.12%]