Question: 1. (Inflation and interest rates) You're considering an investment that you expect will produce an 8% return next year, and you expect that your real rate of return on this investment will be 6%. What do you expect inflation to be next year?
2. (Inflation and interest rates) What would you expect the nominal rate of interest to be if the real rate is 4% and the expected inflation rate is 7%?
3. (Inflation and interest rates) Assume the expected inflation rate to be 4%. If the current real rate of interest is 6%, what ought the nominal rate of interest to be?