f the nominal interest rate is 2.39% and expected inflation rate is 2.1%, Fisher equation says...

Question

Question

f the nominal interest rate is 2.39% and expected inflation rate is 2.1%, Fisher equation says that the required return the should be approximately

-0.29%

0.29%

2.29%

4.49%

None of the above is correct

business finance

Answer 1

Answer #1

Ans 0.29%

(1 + nominal interest rate) = (1 + real rate) * ( 1 + inflation rate)

( 1 + real rate) = (1 + nominal interest rate)/ ( 1 + inflation rate)

( 1 + real rate) = (1 + 2.39%) / (1 + 2.1%)

( 1 + real rate) = 1.0029

real rate = 0.29%

Answer 2

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