Question

Suppose the Treasury Bills are currently paying 2.75% and the

expected inflation is 1.4%. What is the real interest?
Group of answer choices
1.35%
1.68%
2.42%
3.08%
4.15%

Answer 1

The correct answer is 1.35%.

Step-by-step explanation:

To calculate the real interest rate, we need to subtract the expected inflation rate from the nominal interest rate.

Nominal interest rate - Expected inflation rate = Real interest rate

In this case:

2.75% - 1.4% = 1.35%

Therefore, the real interest rate is 1.35%.