If a Lender Wants a Real Return of 6 Percent

question 43

Multiple Choice

If a lender wants a real return of 6 percent and she expects inflation to be 4 percent,which of the following is the correct nominal interest rate to charge?

• A) 4 percent
• B) 6 percent
• C) 2 percent
• D) 10 percent
• E) -2 percent

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Definitions:

Employee Pension Plan

A retirement plan funded by an employer that guarantees a specified income to employees upon retirement, often based on years of service and salary history.

Progressive Reformers

Activists and thinkers in the late 19th and early 20th centuries who advocated for wide-ranging changes in society, including government and industry reforms, to address social injustices.

State Intervention

Governmental involvement in economic, social, or personal affairs, usually with the goal of achieving a specific outcome or rectifying a perceived issue.

Political Reforms

Actions taken to improve governance, enhance democratic processes, reduce corruption, and ensure the fair representation of citizens in political institutions.