If the Nominal Interest Rate Is 8 Per Cent and the Current

question 43

Multiple Choice

If the nominal interest rate is 8 per cent and the current inflation rate is 3 per cent, approximately what is the real interest rate?

• A)5 per cent
• B)11 per cent
• C)8 per cent
• D)3 per cent

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Definitions:

Calendar Year

The period of time from January 1 to December 31 in the Gregorian calendar, used as a standard for financial and business reporting.

Cash

A form of currency that includes notes and coins, representing a medium of exchange that companies use to conduct transactions.

Accounts Payable

Liabilities reflecting money owed by a business to its suppliers or creditors for goods and services purchased on credit.

Creditor

An individual or institution that lends money or extends credit to another entity.