The Nominal Interest Rate Minus the Expected Rate of Inflation

question 90

Multiple Choice

The nominal interest rate minus the expected rate of inflation

• A)defines the real interest rate.
• B)is a less accurate measure of the incentives to borrow and lend than is the nominal interest rate.
• C)is a less accurate indicator of the tightness of credit market conditions than is the nominal interest rate.
• D)defines the discount rate.

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Definitions:

Appropriate Discount Rate

The interest rate used to discount future cash flows of an investment, reflecting the risk level and the time value of money.

Annual Dividend

The total dividend payment a company distributes to its shareholders for the year, often cited as a per share amount.

Dividends Increase

This is when a company decides to increase the amount of money distributed to its shareholders from its earnings.