The real rate is 55 percent and the inflation rate is 24 per

The real rate is 5.5 percent and the inflation rate is 2.4 percent. What rate would you expect to see on a Treasury bill?

Solution

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

(1+0.055)=(1+nominal rate)/(1+0.024)

1+nominal rate=(1.055*1.024)

nominal rate=(1.055*1.024)-1

=8.032%