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1. What is the relationship between real interest rate, nominal interest rate and inflation rate?...

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Accounting

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1. What is the relationship between real interest rate, nominal interest rate and inflation rate? 2. What are the reasons for very high nominal interest rates in the 1980s? 3. A 5 year government treasury bond is bought at SP a. Can the price be above face value? Why? b. Can the price be below face value? Why? C. If he/she wants to sell it after 2 years, will he/she makes a positive rate of return or negative rate of return? Explain. 4. Explain what happens to the price and interest rate of a bond when a. Interest rate is expected to increase in the future b. Expected inflation increases C. Wealth of investors increases d. Economy goes into a recession - in this case explain the theoretical outcome and observed outcome

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