If the Nominal Rate of Interest Is 6% and the Inflation

question 32

Multiple Choice

If the nominal rate of interest is 6% and the inflation rate is 3%, what is the real rate of interest?

• A)-9.5%
• B)-305%
• C)1.5%
• D)3%

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Definitions:

Market Values

The present cost at which a product or service may be purchased or sold in an open market.

Par Value

The face value of a stock or bond, representing the nominal or dollar value assigned when issued.

Debentures

A type of long-term debt instrument unsecured by physical assets or collateral, relying on the creditworthiness and reputation of the issuer.

Pledged As Collateral

Assets that are offered as security for the repayment of a loan, where the lender has the right to take possession of the assets if the borrower defaults on the loan obligations.