The Real Interest Rate

question 6

Multiple Choice

The real interest rate

• A) is approximately equal to the nominal interest rate plus the inflation rate.
• B) is positively related to the inflation rate.
• C) is approximately equal to the nominal interest rate minus the inflation rate.
• D) can never be negative.

---

Definitions:

Price-earnings Ratio

A valuation metric that compares a company's current share price to its per-share earnings.

Dividend Payout Ratio

A financial metric that measures the percentage of a company's earnings paid out to shareholders as dividends, indicating how much money a company returns to shareholders versus how much it keeps to reinvest.

Gross Margin Percentage

A profitability metric calculated as gross margin (sales minus cost of goods sold) divided by sales, expressed as a percentage.

Net Profit Margin Percentage

A financial metric that shows what percentage of a company's revenue remains as profit after all expenses are deducted.