Unformatted text preview: Q. 3.37% E. 5.58% . 3.43% F. 5.62%
C. 3.55% G. 5.75%
D. 3.61% H. 5.86% The real rate of interest (R) is equal to 2.5% and will stay at this level for all future years. The nominal rate of
interest (r) and the interest rate risk premium (IR) on one—, two, three, and fouryear zero coupon bonds are
listed below. What is the expected inﬂation rate for year four (h4)? As in class, assume that the nominal interest
rate is equal to the real interest rate plus the inﬂation premium plus the interest rate risk premium. Ignore other premiums. [/4 C37 31% Z : i 0!? 57! a;
[r «em‘ °4 m i; r. J .1? I .., ( r1= 8.68125%, 1R1 = 0.80% 1.: 23 "L5 ' if}: .1
r2=9.15765%,IR2:1.00% .. my
r3=8.99251%,IR3= 1.15% 2 7.51"“, 3 L1 2 "r:
r4=8.63289%,IR4=1.25% ' 7, <1“ . 1 V A. 3.37% E. 5.58% B. 343% F. 5.62% c. 3.55% G. 5.75% D. 3.61% H. 5.86% The real rate of interest (R) is equal to 2.5% and will stay at this level for all future years. The nominal rate of
interest (r) and the interest rate risk premium (IR) on one, two, three—, and fouryear zero coupon bonds are
listed below. What is the expected inﬂation rate for year four (h4)? As in class, assume that the nominal interest
rate is equal to the real interest rate plus the inﬂation premium plus the interest rate risk premium. Ignore other
premlums. r1= 8.68125%, 1R1 = 0.80%
r2 = 9.15765%,1RZ = 1.00% .
r3 = 8.99251%, 1R3 = 1.15% , 771 WI“
r4 = 8.664035%, 1R4 = 1.25% . 7, .. WU": A. 3.37% E. 5.58%
B. 3.43% F. 5.62%
’ G. 5.75%
H. 5.86% ...
View
Full Document
 Spring '08
 Wigmans,F
 Finance

Click to edit the document details