If the Nominal Interest Rate Per Year Is 10 Percent

question 12

Multiple Choice

If the nominal interest rate per year is 10 percent and the inflation rate is 4 percent, what is the real rate of interest?

• A)10.0 percent
• B)4.1 percent
• C)5.8 percent
• D)14.0 percent

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Definitions:

Common Stock

A type of security that represents ownership in a corporation, with holders usually having voting rights and potentially receiving dividends.

Portfolio Beta

A metric assessing how a portfolio's risk and volatility stack up against that of the general market.

Treasury Bills

Short-term U.S. government debt obligations backed by the Treasury Department with a maturity of less than one year.

Portfolio Expected Return

The anticipated return on an investment portfolio based on the predicted returns of its individual securities and their respective weights.