The Current 1-Year Treasury Rate Is 10 Per Cent

question 6

Multiple Choice

The current 1-year Treasury rate is 10 per cent.It is predicted that the annual inflation rate is going to be 0.50 per cent lower than originally expected.The lower inflation forecasts reflect the unexpected drop in world prices.When the market opens tomorrow,what should the Treasury rate be? (Assume that the real rate of interest is 9.0 per cent.)

• A)9.5%.
• B)10%.
• C)10.5%.
• D)11%.

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