Assume That Expected Rates of Inflation Over the Next 5

question 51

Multiple Choice

Assume that expected rates of inflation over the next 5 years are 4 percent,7 percent,10 percent,8 percent,and 6 percent,respectively.What is the average expected inflation rate over this 5-year period?

• A) 6.5%
• B) 7.5%
• C) 8.0%
• D) 6.0%
• E) 7.0%

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Definitions:

Put Option

A financial contract giving the buyer the right, not the obligation, to sell an asset at a specified price within a specified time.

Market Price

The present cost at which a good or service can be purchased or sold.

Call Option

A financial contract giving the buyer the right, but not the obligation, to buy a stock, bond, commodity, or other assets at a specified price within a specific time frame.

Strike Price

The set price at which an option contract can be bought (call) or sold (put) when it is exercised.