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Part 1

Interest rate fundamentals: The real rate of returnCarl Foster, a trainee at an investment banking firm, is trying to get an idea of what real rate of return investors are expecting in today's marketplace. He has looked up the rate paid on 3-month U.S. Treasury bills and found it to be

4.3%

He has decided to use the recent rate of change in the Consumer Price Index as a proxy for the inflationary expectations of investors. That annualized rate now stands at

On the basis of the information that Carl has collected, what exact and approximate estimate can he make of the real rate of return?

0.7%

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The exact estimate of the real rate of return is enter your response here%.

The approximate estimate of the real rate of return is?