Which One of the Following Is Correct Concerning Real Interest

question 40

Multiple Choice

Which one of the following is correct concerning real interest rates?

• A)real interest rates are constant.
• B)real interest rates must be positive.
• C)real interest rates must be less than nominal interest rates.
• D)real interest rates, if positive, increase purchasing power over time.

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Definitions:

Compounded Monthly

Refers to the process where the interest earned is added to the principal sum each month, and future interest is calculated on the new total.

Sinking Fund

A reserve fund established by setting aside revenue over a period of time to fund a future capital expense or repayment of a long-term debt.

New Roof

The process or cost associated with replacing an old roof with a new one, either for repair or upgrade purposes.

Compounded Annually

Interest calculated on the initial principal and the interest accumulated over the previous periods once every year.