When Individuals Make Decisions About How Much Money and Bonds

question 65

Multiple Choice

When individuals make decisions about how much money and bonds to hold, which of the following variables will portfolio holders consider?

• A) The nominal interest rate only.
• B) The expected inflation rate only.
• C) Both the nominal and real interest rates.
• D) The real interest rate only.
• E) Either the real interest rate or the expected inflation rate.

---

Definitions:

Coefficient of Correlation

A numerical metric that determines the intensity and course of a straight-line association between two variables that can be quantified.

Sample Coefficient

A measure that quantifies some kind of property or behavior, such as variability or correlation, from a sample of a population.

Correlation

Correlation refers to a statistical measure that indicates the extent to which two or more variables fluctuate together. A positive correlation indicates that as one variable increases, the other does too.

Coefficient of Determination

A statistic used in the context of statistical models whose main purpose is to provide a measure of how well observed outcomes are replicated by the model.