If Future Price Changes Were Perfectly Anticipated by Borrowers and Lenders

question 159

Multiple Choice

If future price changes were perfectly anticipated by borrowers and lenders, then _____

• A) the expected real interest rate would be higher than the actual rate.
• B) the expected real interest rate would lower than the actual rate.
• C) the real interest rate in the future would decrease by the amount of the price increase.
• D) the real interest rate in the future would increase by the amount of the price increase.
• E) the real interest rate in the future would remain unchanged.

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Definitions:

Payments Quickly

Payments quickly refers to the process of settling financial transactions or obligations in a brief period of time, enhancing liquidity and cash flow management.

Average Collection Period

The average number of days it takes for a company to receive payments from its credit customers.

Receivables Turnover

A financial metric measuring how efficiently a company collects its receivables or the speed at which it turns credits into cash.

Current Ratio

An assessment ratio that evaluates how well a company can meet its obligations due within the next year, by dividing its current assets by its current liabilities.