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.
so if we see above FV=PV(1+i) for $1. spattewar: interest rate = nominal rate + risk premium. nominal rate contains the inflation factor since inflation is macro economical term and is indepedant on the market type. whereas the risk premium depends upon the market type.