Nominal Interest Rates Are Higher Than Real Interest Rates as Long

question 52

Multiple Choice

Nominal interest rates are higher than real interest rates as long as

• A)expected inflation is positive.
• B)the government taxes interest income.
• C)inflation is expected to decline in the future.
• D)long-term interest rates are higher than short-term interest rates.

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Definitions:

Index Funds

Investment funds designed to replicate and track the components of a market index.

Sharpe Measure

A financial metric used to measure the performance of an investment compared to its risk, indicating how much excess return you are receiving for the extra volatility endured by holding a riskier asset.

Mean-Variance Analysis

Evaluation of risky prospects based on the expected value and variance of possible outcomes.

Treynor-Black Model

A portfolio optimization model that blends passive and active management strategies to maximize returns above the market's performance.