Under Which of the Following Assumptions Would the Nominal Interest

question 2

Multiple Choice

Under which of the following assumptions would the nominal interest rate be equal to the real interest rate?

• A)Expected inflation is equal to the nominal interest rate.
• B)Expected inflation is equal to the real interest rate.
• C)Expected inflation is negative.
• D)Expected inflation is equal to zero.
• E) none of the above

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Definitions:

Dividends Per Share

The amount of dividends paid to shareholders, divided by the number of outstanding shares of a company's stock.

Stock Price

The present rate at which a company's stock is bought and sold on the stock exchange.

Present Value

The present worth of a future amount of money or sequence of cash payments, calculated using a particular return rate.

Dividends

Payments made by a corporation to its shareholder members, usually derived from the company's earnings.