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a Secure https/www.mathxl.com/Student/PlayerHomework.aspxhomeworkld-5035791928ques Fin 301-01 (Fall 2018) Homework: Chapter 2 Homework Score: 0 of 1 pt Problem 2-3 (similar to) Save 5 of 15 (4 complete) HW Score: 142996, 4 of Question Help * (Inflation and interest rates) You' re considering an investment that you expect will produce a return of 10 percent next year, and you expect that your real rate of return on this investment will be 6 percent What do you expect inflation to be next year? The expected nflation rate next year will be 004 % (Round to two decimal places ) Enter your answer in the answer box and then click Check Answer All parts showing Clear All Final Check

Explanation / Answer

As per fisher's equation:

(1+nominal rate)=(1+real rate)*(1+inflation rate)

(1+0.10)=(1+0.06)*(1+inflation rate)

(1+inflation rate)= 1.1/1.06

1+inflation rate= 1.0377

Inflation rate=3.77%

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