Problem
At present, the nominal interest rate is 7 percent, and the expected inflation rate is 5 percent. The current year is the base year for the price index used to calculate inflation.
a. What is the real interest rate?
b. What is the anticipated value of the price index next year?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.