If inflation is anticipated to be 10 percent during the next year while a nominal rate of 20 percent will be earned on U.S. Treasury bills, then what is the accurate real rate of return on these securities?(Round final percentage answer to decimal places.)

Question

Quizplus · Accepted Answer

The real rate of return can be calculated using the Fisher equation: (1 + nominal rate) / (1 + inflation rate) - 1. Plugging in the given values: (1 + 0.20) / (1 + 0.10) - 1 = 1.20 / 1.10 - 1 = 0.0909 or 9.09%.

If Inflation Is Anticipated to Be 10 Percent During the Next