A Year Ago, You Invested $2,500 in a Savings Account

question 44

Multiple Choice

A year ago, you invested $2,500 in a savings account that pays an annual interest rate of 5.7%. What is your approximate annual real rate of return if the rate of inflation was 1.6% over the year?

• A) 4.1%
• B) 2.5%
• C) 2.9%
• D) 1.6%

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Definitions:

Cost Of Goods Sold

Direct expenditures linked to the production of goods sold by a business.

LIFO Basis

A method of inventory valuation where the last items placed into inventory are the first ones taken out for cost of goods sold calculations.

Periodic Inventory System

An inventory accounting method where inventory levels are updated and physical counts are conducted at specific intervals.

Ending Inventory

The total value of goods available for sale at the end of an accounting period, calculated by adding purchases to the beginning inventory and subtracting the cost of goods sold.