Suppose That You Purchase a $5,000 Bond That Pays 7

question 176

Multiple Choice

Suppose that you purchase a $5,000 bond that pays 7 percent interest annually and matures in five years. If you expect that the inflation rate during the next five years will be 2 percent annually, what real rate of return do you expect to earn?

• A) 2 percent
• B) 5 percent
• C) 7 percent
• D) 9 percent

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Definitions:

Disorder

A disruption to regular bodily structure and function, leading to disease or ailment.

Heat

A form of energy transfer between two substances or systems due to a temperature difference.

Energy

The capacity to do work or produce change, existing in various forms such as kinetic, thermal, electrical, chemical, nuclear, or solar.

Form

The shape, visual appearance, or configuration of an object, in various contexts it can refer to something structural, artistic, or abstract.