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The two-year interest rate is 10.8%, and the expected annual inflation rate is 5.4%. a.What...

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Finance

The two-year interest rate is 10.8%, and the expected annual inflation rate is 5.4%. a.What is the expected real interest rate? b-1. If the expected rate of inflation suddenly rises to 7.4%, what does Fishers theory say about how the real interest rate will change? b-2. If the expected rate of inflation suddenly rises to 7.4%, what will be the new nominal rate?

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