
Explanation:
Recall that:
r_real ≈ r_nominal - r_inflation
⇒ r_nominal = r_real + r_inflation
According to the information given in the question:
Expected inflation = 125/117 - 1 = 0.06838 = 6.838%
So,
r_nominal = 7.5% + 6.838% = 14.338%
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