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Fisher effect

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10. Suppose the equilibrium real rate is 3% and the expected rate of inflation in the U.S. is 4%. What is the equilibrium nominal interest rate?

11. What is the equilibrium nominal 1-year interest rate if the required real rate of return is 3% and the expected rate of inflation is 5%?

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This posting provides the solution to the student's question. The equilibrium nominal one-year interest rate required for a rate of return is determined.

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