If You Borrow Money at a Nominal Interest Rate of 5

question 43

Multiple Choice

If you borrow money at a nominal interest rate of 5 per cent and the inflation rate is 10 per cent, what real interest rate will you pay?

• A) -5 per cent
• B) 0.5 per cent
• C) 2 per cent
• D) 10 per cent

---

Definitions:

Individual Problem Solving

The process by which an individual identifies, analyses, and finds a solution to a problem on their own.

Programmed Decisions

Decisions that are routine and repetitive, for which established processes or rules exist.

Nonprogrammed Decisions

Decisions that are made in response to unique, non-recurring or exceptional situations that require specific solutions.

Managerial Discretion

The flexibility and authority granted to managers to make decisions and act according to their judgment in organizational settings.