Suppose the Annual Nominal Interest Rate Is 10percent and the Inflation

question 114

Multiple Choice

Suppose the annual nominal interest rate is 10percent and the inflation rate is 6 percent. If you deposit $1,000, at the end of the year:

• A) you will have earned a real rate of return of 4 percent.
• B) your purchasing power will have increased.
• C) your savings will have nominal increased by $100.
• D) All of these statements are true.

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