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Homework answers / question archive / If the nominal rate of interest is 12
If the nominal rate of interest is 12.17% and the real rate of interest is 7.76%?, what is the expected rate of? inflation?
Computation of the expected rate of inflation:-
(1+Nominal rate of interest) = (1+Real rate of interest) * (1+Inflation rate)
(1+12.17%) = (1+7.76%) * (1+Inflation rate)
(1+Inflation rate) = (1+12.17%) / (1+7.76%)
Inflation rate = 1.0409 - 1
= 4.09%
