If he were that kind of hands-on manager, this mess might not have happened in the first place.
The real risk-free rate is 4%. 1. The real risk-free rate is 4%. Inflation is expected to be 3% this year and 5% during the next 2 years. Assume that the maturity risk premium is zero.
In a simple discount loan, such as a T-bill, the discount rate is not the actual interest rate the borrower pays. In the Example above, the discount rate .135% was applied to the face value of $8000, rather than the $7994.60 that the Treasury (the borrower) received. EXAMPLE: Find the actual interest rate paid by the Treasury in the Example above. Solution: Use the formula for simple interest, I = Prt with r as the unknown. 7994.60 (the amount the Treasury received) and I= 5.40 (the discount amount). So the actual interest rate is .13509%.