The Consumer Price Index Was 200 in 2006 and 210

question 224

Multiple Choice

The consumer price index was 200 in 2006 and 210 in 2007. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period?

• A)1.5 percent
• B)1.75 percent
• C)11.25 percent
• D)11.5 percent

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Definitions:

Risk-free Return

The theoretical return on an investment with zero risk of financial loss, typically associated with government bonds.

Standard Deviation

A statistical measurement that depicts the variation or dispersion of a set of values, commonly used in finance to measure the volatility or risk of an investment.

Defined Contribution Plan

A type of retirement savings plan where the amount contributed to the plan is defined, but the future benefit amounts are not guaranteed.

Risk-free Return

The return on an investment with no risk of financial loss, typically associated with government bonds.