Since Last Year, the Price of Gold Has Risen from $1100

question 37

Multiple Choice

Since last year, the price of gold has risen from $1100 to $1420. What annual inflation rate would leave the real price of gold unchanged over the last twelve months?

• A) Approximately 29%
• B) 40%
• C) Approximately 71%
• D) 320%
• E) none of the above

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Definitions:

Asset Bubble

A situation in financial markets where the price of an asset inflates to levels far beyond its intrinsic value, leading to an eventual crash.

Efficient Markets Hypothesis

The theory that all available information is fully reflected in asset prices, meaning that it's impossible to consistently achieve higher-than-market returns.

Firm-Specific Risk

Risk that affects only a single company

Market Risk

The possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets.