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.
Donât Forget Inflation! The nominal interest rate (or money interest rate) is the percentage increase in money you pay the lender for the use of the money you borrowed. For instance, imagine that you borrowed $100 from your bank one year ago at 8% interest on your loan.When you repay the loan, you must repay the $100 you borrowed plus $8 in interestâa total of $108. But the nominal interest rate doesnât take inflation into account.he diagram below illustrates the relationship between nominal interest rates, real interest rates, and the inflation rate. As shown, the nominal interest rate is equal to the real interest rate plus the rate of inflation 1.