This is kind of a dumb question. I just want to make sure that I understand why this is the right answer
Question: If the real rate of interest is 5.2% and the nominal rate is 7.8%, what is the expected inflation premium?
The answer is listed as 2.471%.
I am getting 1.0247, which is right I guess if I subtract 1. Can you explain why this is the right answer? Do I always subtract one with this formula? The one given is (1+inflation premium)=(1+ nominal rate)/(1+real rate).
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