If the Nominal Interest Rate Is 8 Percent and the Inflation

question 211

Multiple Choice

If the nominal interest rate is 8 percent and the inflation rate is 4 percent, what is the real interest rate?

• A) 0.44 percent
• B) 4 percent
• C) 6 percent
• D) 12 percent

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Definitions:

Statement of Income

A financial document that shows a company's revenues, expenses, and profits over a specific period, highlighting the company's operating performance.

Share Capital

The amount of money that shareholders invest in a company in exchange for shares of ownership.

Statement of Cash Flows

a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.

Investing Transactions

Financial activities related to the acquisition or sale of long-term assets and other investments.