The Long Term Inflation Rate Average Was 3

question 8

Multiple Choice

The long term inflation rate average was 3.2% and you invested in long term corporate bonds over the same period which earned 6.1%. What was the average risk premium you earned and your precise rate of return?

• A) 2.9%; -2.9%
• B) 9.3%; 10.3%
• C) 2.9%; 2.81%
• D) cannot be determined

---

Definitions:

Specialize

The process of focusing efforts and resources on a narrow area of expertise to increase efficiency and proficiency.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors.

Benefit From Trade

The advantage gained by countries, entities, or individuals from engaging in international trade, often including access to a wider variety of goods and services.

Absolute Advantage

The ability of an entity to produce a good or service more efficiently than its competitors using the same amount of resources.