An Effective Method for Teaching and Understanding ...
where R is the real rate of interest, r is the nominal rate of interest, and i is the inflation rate. (In our example, R = (1+0.10) / (1+0.04) - 1 = 0.057692308) Care must be taken when using equation (7) in that all three rates must be expressed as effective rates and all three must have the same quotation period (e.g., all must be quoted over ... ................
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