Real interest rates compared to nominal interest rates

Assignment Help Financial Management
Reference no: EM13881168

You observe that the current interest rate on short-term U.S. Treasury bills is 2.64 percent. You also read in the newspaper that the GDP deflator, which is a common macroeconomic indicator used by market analysts to gauge inflation rate, currently implies that inflation is 1.3 percent. Given this information, what is the approximate real rate of interest on short term treasury bills? Is it likely that your answer would change if you used some alternative measure for the inflation rate, such as the CPI? What does this tell you about the observability and accuracy of real interest rates compared to nominal interest rates?

Reference no: EM13881168

Previous Q& A

  What is the present value of an annuity

What is the present value of an annuity due that pays 250 dollars per year for 4 years, if the appropriate discount rate is 5.0 percent per year, compounded annually?

  What is the present value of an ordinary annuity

What is the present value of an ordinary annuity that pays $40 every 6 months, for 10 years, if the interest rate is 8.0 percent per year, compounded semi-annually?

  What the relationship of the individual citizen

What  the relationship of the individual citizen to the federal government and to the state government under the proposed Constitution? How does the relationship come to terms with the idea that a republic must "guard one part of society against the ..

  What is the main goal for accounting rules

What is the main goal for accounting rules in the United States and around the world? What characteristics must financial information possess to reach that goal?

  What is the net present value of the factory

A factory costs $860,000. You reckon that it will produce an inflow after operating costs of $176,000 a year or 10 years. If the opportunity cost of capital is 12%, what is the net present value of the factory? What will the factory be worth after ni..

  Compounding factors-discounting factors and financial risk

Most of us intuitively understand that a dollar required today does not have the same value as a dollar needed (or utilized) in the future. This is due to several factors including interest rates, compounding factors, discounting factors and financia..

  A woman worked part-time as a clerk at a drugstore

A woman worked part-time as a clerk at a drugstore. She worked mostly on weekdays from 5 PM to 9 PM, but was occasionally given other shifts. Due to glaucoma, she eventually lost all her sight in her left eye. She had no difficulty performing her job..

  Describe how a pos system could be useful to a company

Describe how a POS system could be useful to a company marketing managers. How could it be useful to production managers?

  Volbeat corporation has bonds on the market

Volbeat Corporation has bonds on the market with 16 years to maturity, a YTM of 10.5 percent, and a current price of $943. The bonds make semi-annual payments. What must the coupon rate be on the bonds?

  Locate an article or report of a family medical leave act

Locate an article or report of a Family Medical Leave Act (FMLA) violation.Based on the Family Medical Leave Act (FMLA) violation you researched in this unit:

Reviews

Write a Review

 

Similar Q& A

  One area in which you are assisting is in the setup of

one area in which you are assisting is in the setup of business development in central and south america for navigation

  Report the maximum value of the objective function

Firm wants to determine how many units of each of two products (products X and Y) they should produce in order to make the most money. The profit from making a unit of product X is $100 and the profit from making a unit of product Y is $80. Although ..

  What is the profit margin

McCormac Co. wishes to maintain a growth rate of 8 percent a year, a debt-equity ratio of 0.51, and a dividend payout ratio of 56 percent. The ratio of total assets to sales is constant at 1.23. What is the profit margin?

  Bank plans to reduce its holdings of liquid assets

A bank plans to reduce its holdings of liquid assets but at the same time it does not with to increase its liquidity risk. What and how can the bank do to achieve its wishes? Please list and clearly explain a little bit.

  What is the purpose of conducting an experiment?

What is the purpose of conducting an experiment?

  What is the effective annual interest rate on the loan

If you take out a $9,000 car loan that calls for 48 monthly payments at an APR of 10%. What is your monthly payment? What is the effective annual interest rate on the loan?

  What is the lock in three month interest rate

A bank wants to lock in the 3-month interest rate starting on June 20, 2017. Currently, 6/2017 Eurodollar futures price is 94.51 and 9/2017 Eurodollar futures price is 97.55. What is the lock in 3-month interest rate between 6/2017 and 9/2017? (margi..

  What is current value of call on stock with exercise price

The risk-free rate is currently 2.8%. In one year the price of a given share of stock that currently trades at $40 per share is expected to either increase by 8% or decrease by 2%. What is the current value of a call on this stock with exercise price..

  What is her annualized holding period rate of return

Seven months ago, Ms. Investor purchased 400 shares of stock on margin at a price per share of $36. The initial margin requirement on her account is 70 percent and the maintenance margin is 40 percent.  What is her annualized holding period rate of r..

  New issue of preferred stock

E-Eyes.com has a new issue of preferred stock it calls 20/20 preferred. The stock will pay a $20 dividend per year, but the first dividend will not be paid until 20 years from today. If you require a 11.00 percent return on this stock, how much shoul..

  Households and nonprofit organizations

Using data from the Z.1 statistical release published by the Board of Governors of the Federal Reserve please answer the questions based on the following data series. Households and nonprofit organizations; home mortgages; liability

  The effective annual interest rate for this account

At the end of each year, for 20 years, I deposit $1000 dollars into an account. The effective annual interest rate for this account (called account 1) is 5%. At the end of each year, i take the interest I am paid from this account and invest it into ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd