Qusetion: You are considering investing money in Treasury securities. Currently the nominal rate of return on treasury bills is 4.6%and the future inflation rate is expected to be1.35%.
a) What is the real rate of interest for Treasury securities ignoring the cross-product between the real rate of interest and the inflation rate? Write the formula and plug in the numbers,i.e. show your work!
b) What is the real rate of interest on those Treasury securities?