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£https://revel.pearson.com/#/courses/5b0770d4e4b0afc7a9c058bf/union/performance Search PEARSON Practice: Section 9.6 Score: 3 of 6 pts 4 or 6 Question 4: Nominal versus Real Interest Rates 7 Question Help Settings Real-Time Data Analysis Exercise* In Apil 2017, the nominal interest rate on the one-year Treasury bill was 101 percent. Fro you bought the one-year Treasury bill in April 2017, the interest rate you earn places and include a minus sign if necessary.) m Apri 2017 to April 2018, the consumer price index rose from 244.1 to 250 0. I ed yer the follo ing 12-month penod was %, enerio rans erounde a ho decimal Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis nter your answer in the answer box and then click Check Answer

Solution

The inflation rate in the period from April 2017 to April 2018 would be: (250 - 244.1) / 244.1 = 0.0241 = 2.41%

The nominal interest rate I earned over the 12 month period = 1.01%

The real interest rate I earned over the 12 month period = 1.01% - 2.41% = -1.4%

Hence I earned -1.4% real interest rate over the 12 month period.