You Are Given the Following Data: Assume That a Highly

question 32

Multiple Choice

You are given the following data: Assume that a highly liquid market does not exist for long-term T-bonds, and the expected rate of inflation is a constant.Given these conditions, the nominal risk-free rate for T-bills is __________, and the rate on long-term Treasury bonds is __________.

• A) 4%; 14%
• B) 4%; 15%
• C) 11%; 14%
• D) 11%; 15%
• E) 11%; 17%

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Definitions:

Direct Exchange

The process of trading goods or services directly for other goods or services without using a medium of exchange, such as money.

Goods And Services

The products and activities that satisfy human wants or needs, goods being tangible items and services being intangible.

Barter

A system of exchange where goods or services are traded directly for other goods and services without the use of money.

Commodity Money

Commodity Money is a type of currency in which the value comes from a commodity of which it is made, such as gold or silver coins.