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Monday 13 April 2015

Rearranged into an expectations augmented Fisher equation:-

http://en.wikipedia.org/wiki/Fisher_equation?hc_location=ufi

Rearranged into an expectations augmented Fisher equation and given a desired real rate of return and an expected rate of inflation πe (with superscript e meaning "expected") over the period of a loan, it can be used as an ex-ante version to decide upon the nominal rate that should be charged for the loan:
i = r + \pi^e

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