Exercise $19-7$ Algo

You would like to invest $$30,000$ for a year in a risk$-$free investment. A conventional certificate of deposit $($CD$)$ offers a $4\mathrm{.}6\%$ annual

rate of return. You are also considering an "Inflation$-$Plus" CD which offers a real rate of return of $1\mathrm{.}6\%$ regardless of the inflation rate.

a$.$ What is the implied $($expected$)$ inflation rate? $($Round your answer to $2$ decimal places.$)$

b$.$ You decide to invest $$15,000$ in the conventional CD and $$15,000$ in the "Inflation$-$Plus" CD$.$ What is your expected dollar value at

the end of the year?

Expected value