Answer the questions below.
a.Suppose the Fisher hypothesis holds for an economy that has an expected real interest rate of 3 percent. For each of the expected inflation rates of 0, 3, 6, 9, and 12 percent, calculate the after-tax expected real interest rate (expressed in percentage points with two decimals), if the tax rate is 15 percent. b.Suppose the Fisher hypothesis does not hold, but instead that the after-tax expected real interest rate will be unchanged at 2.5 percent if the expected inflation rate changes. For each of the expected inflation rates of 0, 3, 6, 9, and 12 percent, calculate the (before-tax) expected real interest rate (expressed in percentage points with two decimals), if the tax rate is 15 percent.
What will be an ideal response?
a.Use the equations i = r + ?e and ra = [(1 ?t) ×i] ??e Plug in the various values of ?e, and the given value of r. The results are shown in the following table: Expected real interestrate, rExpected inflationrate, ?eNominal interestrate, iAfter-tax expected realinterest rate, ra 3.0 0.0 3.02.55 3.0 3.0 6.02.1 3.0 6.0 9.01.65 3.0 9.012.01.2 3.012.015.00.75 b.First, find the nominal interest rate needed to keep ra constant. Since ra = [(1 ?t) ×i] ??e, then i = (ra + ?e) / (1 ?t). Once you find i, use the equation i = r + ?e, so r = i ??e to find r. The results are shown in the following table: After-tax expected realinterest rate, raExpected inflationrate, ?Nominal interestrate, iExpected real interestrate, r 2.5 0.0 2.942.94 2.5 3.0 6.473.47 2.5 6.010.004.00 2.5 9.013.534.53 2.512.017.065.06
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A) To increase your consumption benefits B) If you expect prices will fall in the future C) As a shopping convenience D) As a source of emergency funds
Congress passed the ________ to help curb financial abuses at companies that issue their stock to the public.
Fill in the blank(s) with the appropriate word(s).
The Hannibal Homers minor league baseball club is considering an expansion of its stadium to increase capacity by 2,000 seats. Management estimates increased revenue from ticket and concession sales to be $600,000 per year for the next 5 years
The cost of expansion is $750,000, with an additional $50,000 in working capital. The working capital increase is permanent (will not be recovered after 5 years). Annual costs are expected to be $200,000 per year, the club's cost of capital is 14%, and its tax rate is 30%. If the stadium addition is depreciated in a straight line to a value of $0.00 over 5 years, what is the NPV of this project (rounded to the nearest dollar)? (Ignore any revenues or costs associated with a terminal value of the project after five years.) A) $165,751 B) $365,751 C) $315,751 D) $1,115,751
AMF Systems uses certain standards to judge the rightness or wrongness of its business's and its personnel's relations to others. These standards are called ________.
A. normative ethics B. personal ethics C. consumer ethics D. business ethics