An analyst is evaluating securities in a developing nation where the inflation rate is very...
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An analyst is evaluating securities in a developing nation where the inflation rate is very high. As a result, the analyst has been warned not to ignore the cross- product between the real rate and inflation. A 6-year security with no maturity, default, or liquidity risk has a yield of 16.55%. If the real risk-free rate is 5%, what average rate of inflation is expected in this country over the next 6 years? (Hint: Refer to "The Links Between Expected Inflation and Interest Rates: A Closer Look".) Do not round Intermediate calculations. Round your answer to the nearest whole number %
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