The one-year nominal rate of interest is 12.2% and the expected annual inflation rate is 6.1%.

a.What is the expected real interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b-1. If the expected rate of inflation suddenly rises to 8.1%, what does Fishers theory say about how the real interest rate will change?multiple choice

• Real rate decreases

• Real rate increases

• Real rate does not change

b-2. If the expected rate of inflation suddenly rises to 8.1%, what will be the new nominal rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)