Suppose the real rate is 4.0 percent and the inflation rate is 5.6 percent.

  

What rate would you expect to see on a Treasury bill? (Round your answer to 2 decimal places. (e.g., 32.16))

Treasury bill rate

%

Explanation:

The Fisher equation, which shows the exact relationship between nominal interest rates, real interest rates, and inflation is:

(1 + R) = (1 + r)(1 + h)

R = (1 + 0.040)(1 + 0.056) – 1 = 0.0982, or 9.82%