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elena-14-01-66 [18.8K]
3 years ago
9

Assume that a three-year Treasury note (T-note) has no maturity premium, and that the real risk-free rate of interest is 3 perce

nt. If the T-note carries a nominal risk-free rate of return of 13 percent and if the expected average inflation rate over the next two years is 9 percent, what is the implied expected inflation rate during Year 3
Business
1 answer:
erik [133]3 years ago
6 0

Answer: 12%

Explanation:

First find the Inflation premium:

= Nominal risk free rate - Real risk free rate

= 13% - 3%

= 10%

Plug it into the following equation:

Inflation premium = { (2 * expected average inflation rate over the next two years) + Inflation rate for third year) } / 3

10% = { (2 * 9%) + 1₃} / 3

3 * 10% =  { (2 * 9%) + 1₃}

30% = 18% + I₃

I₃ = 30% - 18%

I₃ = 12%

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hope I'll help you mark me as brainliest

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At the beginning of a year, a company predicts total direct materials costs of $1,020,000 and total overhead costs of $1,220,000
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Explanation:

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At the beginning of a year, a company predicts total direct materials costs of $1,020,000 and total overhead costs of $1,220,000.

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