The two-year interest rate is 12.8% and the expected annual inflation rate is 6.4%.

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 8.4%, what does Fishers theory say about how the real interest rate will change?

Real rate decreases

Real rate does not change

Real rate increases

b-3. If the expected rate of inflation suddenly rises to 8.4%, 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 %