You Want to Earn a Real Rate of Return of 3.75

question 25

Multiple Choice

You want to earn a real rate of return of 3.75% at a time when the inflation rate is 2.33%. What is the approximate nominal rate that you must earn?

• A)5.78%
• B)5.96%
• C)6.08%
• D)6.14%
• E)6.28%

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Definitions:

Pay Dividends

The act of distributing a portion of a company's profits to its shareholders at intervals, typically quarterly or annually.

Stockholders

Individuals or entities that own shares in a corporation, giving them certain rights such as voting on corporate matters.

Transaction Costs

Expenses incurred when buying or selling goods and services, such as fees and commissions.

Tailoring

Adjusting financial strategies or models to address specific needs or circumstances of a business or investment.