You Borrow Some Amount of Money for Five Years at a Fixed

question 99

Multiple Choice

You borrow some amount of money for five years at a fixed rate of 4 percent.For the first three years,inflation is 3 percent,and for the last two years,deflation is 3 percent.Based on this information,your

• A) real rate of interest was larger than your nominal rate only for the last two years.
• B) real rate of interest was larger than your nominal rate only for the first three years.
• C) real rate of interest exceeded your nominal rate for the entire five years.
• D) nominal rate of interest exceeded your real rate for the entire five years.
• E) nominal rate of interest equaled your real rate for the entire five years.

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Definitions:

Programmed Decisions

Decisions made using a rule, policy, or procedure for routine or repetitive problems that have been encountered before.

Customer Relations

The management and development of interaction between a business and its customers to improve satisfaction and loyalty.

Programmed Decisions

Decisions that are routine and repetitive, which can be addressed through established processes.

Company Policies

Established guidelines and rules that dictate how various aspects of business should be conducted within an organization.