You Are Thinking About Building a New Mall

question 161

Multiple Choice

You are thinking about building a new mall.Your trusted economic consultants say the mall will bring a 7 percent real rate of return.Because you know that you can borrow the necessary money at 5 percent,

• A) you will build the mall only if you expect inflation to remain below 2 percent.
• B) you will definitely build the mall.
• C) you will build the mall,unless you expect inflation to rise above 12 percent.
• D) you will build the mall,so long as you expect inflation to remain below 7 percent.
• E) you will build the mall,so long as you expect inflation to remain below 5 percent.

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Definitions:

M.B.A. Programs

Master of Business Administration programs, offering advanced education in business management and operations.

Nominal Interest Rate

The stated interest rate of a loan or investment without adjusting for inflation.

Real Rate

The interest rate that has been adjusted for inflation, reflecting the true cost of borrowing or the true yield on an investment.

Prices Fall

A situation in the market where the cost of goods or services decreases due to various factors such as supply and demand.