Assume the Consumer Price Index Was 225 in 2006 and 234

question 132

Multiple Choice

Assume the consumer price index was 225 in 2006 and 234 in 2007.The nominal interest rate during this period was 6.5 percent.What was the real interest rate during this period?

• A)2.5 percent
• B)4.0 percent
• C)7.5 percent
• D)10.5 percent

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Definitions:

IFRS

International Financial Reporting Standards, which are a set of accounting standards developed by the International Accounting Standards Board (IASB) that are becoming the global standard for the preparation of public company financial statements.

Financial Statements

Documents that provide an overview of a company's financial condition, including income statement, balance sheet, and cash flow statement.

ROE

Return on Equity - a financial ratio that measures a company's profitability by revealing how much profit a company generates with the money shareholders have invested.

Debt Ratio

A financial ratio that measures the extent of a company's leverage, calculated by dividing total liabilities by total assets.