Suppose That, Initially, the Nominal Interest Rate Is 6 Percent

question 196

Multiple Choice

Suppose that, initially, the nominal interest rate is 6 percent and the inflation rate is 3 percent. If the inflation rate increases to 6 percent, what will be the new nominal interest rate?

• A) 6 percent
• B) 11 percent
• C) 1 percent
• D) 9 percent

---

Definitions:

Single Sum

A lump-sum amount of money taken in a single payment rather than in installments over time.

Owner Control

The extent to which the owners of a business have the power to make decisions and influence the company's operations and strategic direction.

Bonds

Fixed income investments representing loans made by an investor to a borrower, typically corporate or governmental, which pay interest at predetermined intervals.

Notes Payable

A written agreement where the borrower promises to pay back a certain amount of money, under specific terms, to the lender at a future date.