Question

Suppose the real rate is 4.4 percent and the inflation rate is 6 percent. What rate would you expect to see on a Treasury bill? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

I will expect 10.4% of interest to see on a treasury bill.

Explanation:

Real Rate = 4.4%

Inflation rate = 6%

Treasury Bills rate = ?

Rate on treasury bills is decided on different factors like Real interest rate, Inflation rate etc. It offers the Money or nominal interest rates. Using following  formula we can calculate the treasury bills offer rate.

Nominal Interest rate  = Real interest rate + Inflation rate

Nominal Interest rate  = 4.4% + 6%

Nominal Interest rate  = 10.4%