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karush
Gold Member
MHB
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$6–1$ Interest rate fundamentals:
The real rate of return Carl Foster,atrainee at an investment banking firm,
is trying to get an idea of what real rate of return investors are expecting in today’s marketplace.
He has looked up the rate paid on $3-$month U.S.Treasury bills and found it to be $5.5\%$ .
Hehasdecidedtousethe rate of change in the Consumer Price Index as a proxy for the inflationary expectations of investors.
That annualized rate now stands at $3\%$.
On the basis of the information that Carl has collected,
what estimate can he make of the real rate of return?
$\text{$k^∗$=real rate of interest}\\$
$\text{$P^∗$=inflation preminum}\\$
$\text{$RP^∗$=risk premimum}\\$
$$K_1=k^∗ +IP $$
ok this is probably simple
but the wording is ?
ok i realize it would be hard to answer this w\o the text
so here is the link its chp 6 problems
https://www.dropbox.com/s/fl2iq63it...ples-of-Managerial-Finance-by-Gitman.pdf?dl=0
The real rate of return Carl Foster,atrainee at an investment banking firm,
is trying to get an idea of what real rate of return investors are expecting in today’s marketplace.
He has looked up the rate paid on $3-$month U.S.Treasury bills and found it to be $5.5\%$ .
Hehasdecidedtousethe rate of change in the Consumer Price Index as a proxy for the inflationary expectations of investors.
That annualized rate now stands at $3\%$.
On the basis of the information that Carl has collected,
what estimate can he make of the real rate of return?
$\text{$k^∗$=real rate of interest}\\$
$\text{$P^∗$=inflation preminum}\\$
$\text{$RP^∗$=risk premimum}\\$
$$K_1=k^∗ +IP $$
ok this is probably simple
but the wording is ?
ok i realize it would be hard to answer this w\o the text
so here is the link its chp 6 problems
https://www.dropbox.com/s/fl2iq63it...ples-of-Managerial-Finance-by-Gitman.pdf?dl=0
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