Question

Select one 00 out of A the beginning of each month B. the end of each month question C. the end of each day D. the end of each week n22 We can write the true relationship between the nominal interest rate and the real rate and expected inflation as: Select one 0 out of Ar= (1+r)x (1 + h*)- 1 B.r (1+r) x (1 + h) + 1 X question O C. (1+r) (1+ r) x (1+h) D. (1+ r) (1 +r) x (1 + h*) The true relatideship can be expressed as either (1 + r) (1+ h)-1 (1 + r) x (1 + h) or it can be expressed as r= (1 + r) x 23 Which of the statements below is FALSE? Select one: out of A For the home loan, the collateral (the house) is an asset that will increase in value over time (in general) compared with a car loan in which the collateral (the car) decreases in value over time uestion RAnart of the default premium has to do with the freauency of default by the borrower

Answer 1

Hello Sir/ Mam

YOUR REQUIRED ANSWER IS OPTION C

We know that:

$(1+Real \ Interest \ Rate)=\frac{(1+Nominal \ Interest \ Rate)}{(1+Inflation \ Rate)}$

Hence,

Hence,

$(1+r)=(1+r^*)*(1+h)$

$r=(1+r^*)*(1+h)-1$

I hope this solves your doubt.

Feel free to comment if you still have any query or need something else. I'll help asap.

Do give a thumbs up if you find this helpful.