You Lend $5,000 to a Friend for One Year at a Nominal

question 258

Multiple Choice

You lend $5,000 to a friend for one year at a nominal interest rate of 10%.The CPI over that year rises from 180 to 190.What is the real rate of interest you will earn?

• A)0%
• B)4.4%
• C)5.5%
• D)5.8%

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Definitions:

Mnemonic

A learning technique that aids in memory retention or retrieval by associating complex information with simple patterns, phrases, or acronyms.

Sensory Memory

The shortest-term element of memory that acts as a buffer for stimuli received through the senses; a type of storage that holds sensory information very briefly.

Semantically

Semantically refers to the relation of something to the meaning or interpretation of words, phrases, signs, or symbols, rather than their form.

Echoic Memory

A form of sensory memory that retains auditory information for a short period.