What two-year interest rate is 13.8% and the expected annual inflation rate is 6.9%.

a.What is the expected real interest rate?

b. If the expected rate of inflation suddenly rises to 8.9%, what does the Fisher theory say about the real interest rate will change?

What about the norminal rate?

2. The one-year spot interest rate is r1=6.7% and the two year rate is r2=7.7%. I fthe expectations theory is correct, what is the expected one-year interest rate in one year's time?