Hello. How does the length of model periods affect the real interest rate? If the annual rate is q%, what’s the rate for a period of 10 years? Thanks.
The gross interest over two periods is the product of the one-period gross interest rates. That means the net interest rates for a longer period is approximately the sum of the one-period interest rates. Hence, it would be 10\times q \%. However, at such long horizons you may want to not use an approximation.
Thank you.