If the Nominal Interest Rate Is 3 Percent and the Inflation

question 126

Multiple Choice

If the nominal interest rate is 3 percent and the inflation rate is 4 percent,then the real interest rate is

• A)7 percent.
• B)-1 percent.
• C)3 percent.
• D)4 percent.

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Definitions:

Cumulative Preferred Stock

A type of preferred stock that accrues dividends in case they are not paid as scheduled, ensuring that dividends are paid out before any dividends can be issued to common stock shareholders.

Dividends Per Share

The total amount of dividends declared by a company for each share of stock held.

Fiscal Year

A one-year period used for financial reporting and budgeting that may not align with the calendar year.

Cash Dividend

A distribution of profits by a corporation to its shareholders in the form of cash.