The two-year interest rate is 10.8% and the expected annual inflation rate is 5.4%.

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

Expected real interest rate%

b-1.If the expected rate of inflation suddenly rises to 7.4%, what does Fisher's theory say about how the real interest rate will change?

Real rate increasesReal rate does not changeReal rate decreases

b-3.If the expected rate of inflation suddenly rises to 7.4%, what will be the new nominal rate?(Do not round intermediate calculations.Enter your answer as a percent rounded to 2 decimal places.)

Nominal rate%