If Your Rent Increases from $1,000 to $1,100 Over a Period

question 150

Multiple Choice

If your rent increases from $1,000 to $1,100 over a period of one year and your income rises from $6,000 to $7,000,your nominal income has

• A)Increased,but your real income has decreased.
• B)Increased,and your real income has increased.
• C)Decreased,and your real income has decreased.
• D)Increased,but your real income has remained the same.

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Definitions:

Investor Risk Aversion

The tendency of investors to prefer lower-risk investments to avoid potential losses.

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.

Appropriate Discount Rate

The rate used to discount future cash flows to their present value to account for risk and time value of money, reflecting the opportunity cost of capital.

Interest Rate

The share of a loan incurred as interest costs to the borrower, habitually depicted as an annual percentage of the loan's outstanding amount.