If the Nominal Interest Rate Is 8 Percent and Expected

question 280

Multiple Choice

If the nominal interest rate is 8 percent and expected inflation is 3.5 percent, then what is the real interest rate?

• A)11.5 percent
• B)7.5 percent
• C)4.5 percent
• D)2.5 percent

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Definitions:

Entries

Refers to individual records of financial transactions in accounting, documented in journals and ledgers.

Check

A written, dated, and signed instrument that contains an unconditional order from the drawer that directs a bank to pay a definite sum of money to a payee.

Salaries

Regular payments made to employees for their labor or service, typically expressed as an annual amount but often paid on a monthly or bi-weekly basis.

Adjusting Journal Entry

An accounting record entered at the closing of a financial period to distribute profits and losses to the correct period.