Which of the Following Is Incorrect

question 200

Multiple Choice

Which of the following is incorrect?

• A)The nominal interest rate is the rate of interest expressed in terms of current dollars.
• B)The real interest rate is the rate of interest expressed in terms of dollars of constant, or inflation-adjusted, value.
• C)The nominal interest rate is the real interest rate less the rate of inflation.
• D)During periods of inflation, the nominal interest rate will exceed the real interest rate.

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Definitions:

Yield To Maturity

The total expected return on a bond if held until its maturity date, expressed as an annual rate.

Coupon Rate

The annual interest rate paid by a bond relative to its face value, expressed as a percentage.

Duration-based Immunization

A strategy used in portfolio management to minimize the risk of interest rate fluctuations by matching the duration of assets and liabilities.

Rebalanced

The process of realigning the weightings of a portfolio of assets to maintain an original or desired level of asset allocation or risk.