A CFA is evaluating securities in a developing nation where the inflation rate is very high. As a result, the analyst has been warned not to ignore the cross-product between the required real rate and...

A CFA is evaluating securities in a developing nation where the inflation rate is very
high. As a result, the analyst has been warned not to ignore the cross-product between
the required real rate and anticipated inflation, i.e., the exact (multiplicative) approach to
the Fisher equation (formula 2.3) should be used. If the real risk-free rate is 4 percent
and inflation is expected to be 16 percent next year, what is the appropriate nominal yield
on a one-year security with no maturity, default, or liquidity risk?