If the Nominal Interest Rate Is 5 Percent and There

question 316

Multiple Choice

If the nominal interest rate is 5 percent and there is a deflation rate of 2 percent, what is the real interest rate?

• A)7 percent
• B)5 percent
• C)3 percent
• D)3/5 percent

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Definitions:

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable, and inventories.

Petty Cash

A small amount of cash on hand used for paying expenses too small to merit writing a check or using a credit card.

Account Type

A classification that dictates the nature and purpose of an account, such as assets, liabilities, equity, revenue, or expenses.

Normal Balance

The side (debit or credit) of an account that is expected to have a higher balance, depending on the account type.