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

question 59

Multiple Choice

Over the past year, you earned a nominal rate of interest of 3.6% on your money. The inflation rate was 3.1% over the same period. The exact actual growth rate of your purchasing power was

• A) 3.6%.
• B) 3.1%.
• C) 0.48%.
• D) 6.7%.

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Definitions:

Index Model

A statistical approach for measuring the influence of various economic and financial factors on the returns of a stock or portfolio, often used for risk management.

Standard Deviation

A statistic that measures the dispersion of a dataset relative to its mean and is calculated as the square root of the variance.

Stock A

A generic term used to represent a share in the ownership of a company, typically entitling the shareholder to a portion of the profits.

Mean-Variance Efficient Portfolio

A portfolio constructed to have the highest possible expected return for a given level of risk.