Economists Project the Long-Run Real Growth Rate for the Next

question 54

Multiple Choice

Economists project the long-run real growth rate for the next five years to be 2.5 percent and the average annual rate of inflation over this five-year period to be 3 percent. What is the expected nominal rate of return over the next five years?

• A) 0.500 percent
• B) 1.056 percent
• C) 2.750 percent
• D) 5.500 percent
• E) 5.575 percent

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Definitions:

Strike Price

The fixed price at which an options contract may be purchased or sold upon its exercise.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return.