Interest rate fundamentals: The real rate of return Carl Forster, a trainee at an investment banking firm, is trying to get an idea of what real...

1. Interest rate fundamentals: The real rate of return Carl Forster, a trainee at an investment banking firm, is trying to get an idea of what real rate of return investment are expecting in today’s marketplace. He has looked up the rate paid on 3-month U.S. Treasury bills and found it to be 5.5%. He has decided to use the rate of change in the Consumer Price Index as a proxy for the inflationary expectations of investors. That annualized rate now stands at 3%. On the casus if the information that Carl has collected, what estimate can be make of the real rate of return?