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.
For example, if the nominal interest rate offered on a three-year deposit is 4% and the inflation rate over this period is 3%, the investorâs real rate of return would be 1%.While the real rate is low, at least it will preserve the investorâs purchasing power.n the other hand, if the nominal interest rate is, say, 2% in an environment of 3% inflation, the investorâs purchasing power would erode by 1% per annum. Central banks set short-term nominal interest rates, which then form the basis for other interest rates charged by banks and financial institutions.