Money market funds are yielding almost nothing

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Reference no: EM131246714

Money market funds are yielding almost nothing. Last month, the interest rate on a money market fund averaged 0.08% a year and on 5-year CDs it was 2.6% a year. The inflation rate was 0.1% a year.

a- Calculate the real interest rate on each of these financial assers, i.e., the money market fund and trhe 5-year CD.

b- To maintain these real interest rates in the coming months, how will these nominal rates change if the inflation rate increases to 0.2 percent a year?

Reference no: EM131246714

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