The two-year interest rate is 13.2% and the expected annual inflation rate is 6.6%.

a.What is the expected real interest rate?

Expected real interest rate%

b-1.If the expected rate of inflation suddenly rises to 8.6%, what does Fisher's theory say about how the real interest rate will change?

Real rate decreases Real rate increases Real rate does not change

b-3.If the expected rate of inflation suddenly rises to 8.6%, what will be the new nominal rate?

Nominal rate