If the Nominal Interest Rate Is 4 Percent and Expected

question 89

Multiple Choice

If the nominal interest rate is 4 percent and expected inflation rate is 5 percent,the real interest rate

• A) equals 1 percent.
• B) equals -1 percent.
• C) equals 9 percent.
• D) cannot be calculated.
• E) none of the above

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Definitions:

Fair Value

The expected selling price for an asset or the amount needed to cover a liability, facilitated through a systematic deal between market participants on the specific date of measurement.

Qualitative Description

An explanation or characterization of something that focuses on its qualities and characteristics, rather than quantifiable measures.

Contingent Consideration

Usually, an obligation of the acquirer to transfer additional assets or equity interests to the former owners of an acquiree as part of the exchange for control of the acquiree if specified future events occur or conditions are met. However, contingent consideration also may give the acquirer the right to the return of previously transferred consideration if specified conditions are met.