If You Are Promised a Nominal Return of 12% on a One

question 83

Multiple Choice

If you are promised a nominal return of 12% on a one year investment,and you expect the rate of inflation to be 3%,what real rate do you expect to earn?

• A) 5.48%
• B) 8.74%
• C) 9.00%
• D) 12.00%

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Definitions:

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume, remaining constant over a period.

Target Profit

The desired financial gain a company aims to achieve within a specific period through its operations and sales.

Fixed Expense

Charges that stay unchanged with shifts in the amount of products made or the number of sales.

Unit Sales

The measure of the quantity of units of a product sold by a company, often used as an indicator of demand and financial health.