chapter 6

Which tend to be more volatile, short- or long-term interest rates? Short-term interest rates Long-term interest rates If the inflation rate was 3.20% and the nominal interest rate was 4.20% over the last year, what was the real rate of interest over the last year? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. Round intermediate calculations to four decimal place: 1.25% 1.15% 0.85% 1.00%