In 1999,the Nominal Interest Rate on a 30-Year Bond Was

question 176

Multiple Choice

In 1999,the nominal interest rate on a 30-year bond was around 5.85 percent.Assuming that investors have set these contracts expecting a real interest rate of 3 percent,what is the average rate of inflation that investors in the market are expecting over the next thirty years?

• A)2.85 percent
• B)3 percent
• C)5.85 percent
• D)8.85 percent

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Definitions:

Adequacy of Consideration

An evaluation of whether the value exchanged between parties in a contract is reasonably fair at the time of the agreement.

Bargained-for Exchange

An essential principle of contract law involving the mutual exchange of promises or consideration between parties entering an agreement.

Legal Sufficiency

The adequacy of evidence or legal grounding in an agreement, claim, or defense that meets minimum legal standards to proceed or withstand scrutiny in a court of law.

Legal Right

An entitlement derived from a legal system that allows or empowers a person to act in a certain way or requires others to interact with the person according to specified rules.