If a Lender Wants a Real Return of 6 Per

question 22

Multiple Choice

If a lender wants a real return of 6 per cent and she expects inflation to be 4 per cent, which of the following is the nominal interest rate to charge?

• A) 4 per cent
• B) 6 per cent
• C) 2 per cent
• D) 10 per cent

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Definitions:

Issue Debt

The process by which a government, corporation, or other entity raises funds by selling bonds, bills, or other forms of debt instruments.

Working Capital Management

The process of managing the short-term assets and liabilities to ensure a company can continue its operations and meet its financial obligations.

Debt

An amount of money borrowed by one party from another, often used by businesses and governments to fund operations and projects.