Explain the relationship between the cash rate and the real cash rate. Illustrate your discussion by calculating the real rate of return for a 1-year term deposit that provides for the following 3-monthly interest rates over its term: 1 to 3 months - 5% p.a., 4 to 6 months - 7% p.a., 7 to 9 months - 6% p.a. and 10 to 12 months - 7% p.a. Inflation rates over this period are as follows: 1 to 3 months - 2% p.a., 4 to 6 months - 3% p.a., 7 to 9 months - 4% p.a. and 10 to 12 months - 5% p.a.

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The Answer of Explain the relationship between the cash rate and the real cash rate. Illustrate your discussion by calculating the real rate of return for a 1-year term deposit that provides for the following 3-monthly interest rates over its term: 1 to 3 months - 5% p.a., 4 to 6 months - 7% p.a., 7 to 9 months - 6% p.a. and 10 to 12 months - 7% p.a. Inflation rates over this period are as follows: 1 to 3 months - 2% p.a., 4 to 6 months - 3% p.a., 7 to 9 months - 4% p.a. and 10 to 12 months - 5% p.a.

Explain the Relationship Between the Cash Rate and the Real