What were the real interest rates in france and germany

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1. If expected inflation is 100% and the real required return is 5%, what should the nominal interest rate be according to the Fisher effect?

2. In early 1996, the short-term interest rate in France was 3.7% and forecast French inflation was 1.8%. At the same time, the short-term German interest rate was 2.6% and forecast German inflation was 1.6%.

a. Based on these figures, what were the real interest rates in France and Germany?

b. To what would you attribute any discrepancy in real rates between France and Germany?

Reference no: EM131278495

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