Which of the Following Statements Is (Are) TRUE

question 62

Multiple Choice

Which of the following statements is (are) TRUE?

• A) If the real interest rate is 3% and the nominal rate is 5%, the inflation rate is 8%.
• B) If the nominal interest rate is 5% and inflation is 2.5%, the real interest rate is 2.5%.
• C) If the nominal interest rate is 5% and inflation is 4%, the real interest rate is 9%.
• D) If the real interest rate is 3% and inflation is 5%, the nominal interest rate is 2%.

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Definitions:

Simple Interest

Interest determined just on the base amount, not including compounded interest.

Maturity

The point in time when the principal amount of a loan, bond, or other financial instrument becomes due and is to be paid or settled.

Contract

A legally binding agreement between two or more parties that is enforceable by law.

Annually

Pertaining to something that occurs once every year or relating to a period of one year.