The CPI Was 238 in One Year and 244 the Following

question 36

Multiple Choice

The CPI was 238 in one year and 244 the following year.How much did prices rise between these two years?

• A)2.46 percent
• B)5.50 percent
• C)2.52 percent
• D)0.03 percent

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Definitions:

Liquidity Risk

The risk that an asset cannot be sold or converted into cash quickly enough to meet short-term financial obligations without a significant loss in value.

Bond

A fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental) which pays periodic interest payments and the return of the principal at maturity.

Risk Premiums

The extra return or premium demanded by investors for holding riskier assets, above the risk-free rate.

Nominal Risk-Free Rate

The rate of return on an investment with no risk of financial loss, not adjusted for inflation.