The Nominal Rate of Interest Is 5% and the Expected

question 54

Multiple Choice

The nominal rate of interest is 5% and the expected inflation rate is 2%.What is the real rate of interest?

• A) 2.50%
• B) 2.94%
• C) 3.94%
• D) 4.00%
• E) 4.04%

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Definitions:

Partnership Income

The earnings generated by a partnership that are distributed to its partners according to their agreement.

Income Summary

An account used in the closing process that summarizes the revenues and expenses of an accounting period, to determine the net income or loss.

Ratio Based

A method or analysis that involves the comparison of two or more numbers to evaluate the performance, condition, or relationship of different financial aspects of a business.

Net Income

The net income of a business following the subtraction of all costs and taxes from its total revenue.