If the Nominal Interest Rate Is 8 Percent and the Inflation

question 216

Multiple Choice

If the nominal interest rate is 8 percent and the inflation rate is 3 percent, then the real interest rate is

• A)-5 percent.
• B)11 percent.
• C)5 percent.
• D)3 percent.

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Definitions:

Written Security Agreement

A legally binding document that creates a security interest, giving the lender a right to seize collateral if the borrower fails to meet the obligations of the loan.

Collateral

an asset or property that a borrower offers to a lender as security for a loan, which can be seized if the loan is not repaid.

Buyer

A person or organization that acquires goods or services from a seller in exchange for money.

Ordinary Course

Activities that are carried out in the normal and usual way of conducting business.