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The Inflation rates in U.S. and U.K. is 2% and 4% respectively. If the real interes
2%, what are the nominal rates in U.S. and U.K. as per fisher equation?
a) 4.00% in U.S. and 6.00% in U.K.
b) 0.00% in U.S. and 2.00% in U.K.
c) 2.08% in U.S. and 4.04% in U.K.
d) 4.04% in U.S. and 6.08% in U.K.
2​

Answer 1

Answer:

c is the correct option

Answer 2

Option "A" is the correct answer.

Explanation:

Given:

Inflation rates in U.S. = 2%

Inflation rates in U.K. = 4%

Real interest rate = 2%

Nominal rates in U.S. = ?

Nominal rates in U.K. = ?

Computation of nominal rates in U.S.

Nominal rates in U.S. = Real interest rate + Inflation rates in U.S.

Nominal rates in U.S. = 2% + 2%

Nominal rates in U.S. = 4%

Computation of nominal rates in U.K.

Nominal rates in U.K. = Real interest rate + Inflation rates in U.K.

Nominal rates in U.K. = 2% + 4%

Nominal rates in U.K. = 6%

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