Over the Past Year, You Earned a Nominal Rate of Interest

question 78

Multiple Choice

Over the past year, you earned a nominal rate of interest of 14% on your money. The inflation rate was 2% over the same period. The exact actual growth rate of your purchasing power was

• A) 11.76%.
• B) 16.00%.
• C) 15.02%.
• D) 14.32%.

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Definitions:

Merchandise Company

A business that purchases and sells goods, often retail or wholesale, as its primary activity.

Form 1120S

A tax document used in the United States to report the earnings, losses, and dividends of S corporation shareholders.

Corporation

A legal entity that is separate and distinct from its owners. Corporations can own property, incur debts, sue, and be sued.

Permanent Accounts

Accounts in the general ledger that are not closed at the end of the accounting year, such as assets, liabilities, and equity accounts.