The Real Risk-Free Rate Is Affected by Two Factors

question 26

Multiple Choice

The real risk-free rate is affected by two factors:

• A) the relative ease or tightness in capital markets and the expected rate of inflation.
• B) the expected rate of inflation and the set of investment opportunities available in the economy.
• C) the relative ease or tightness in capital markets and the set of investment opportunities available in the economy.
• D) time preference for income consumption and the relative ease or tightness in capital markets.
• E) time preference for income consumption and the set of investment opportunities available in the economy.

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Definitions:

Factor Analysis

A statistical method used to identify underlying variables, or factors, that explain the pattern of correlations among observed variables.

Various Emotions

A wide range of affective states that humans experience, such as happiness, sadness, anger, and fear.

Relation

A connection or association between things or concepts.

Affect Intensity

The measure of how strongly individuals experience their emotions, with some people feeling emotions deeply and vividly while others experience them more mildly.