If You Expect the Inflation Rate to Be 15 Percent

question 42

Multiple Choice

If you expect the inflation rate to be 15 percent next year and a one-year bond has a yield to maturity of 7 percent,then the real interest rate on this bond is

• A)7 percent.
• B)22 percent.
• C)-15 percent.
• D)-8 percent.

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Definitions:

Space Race

The period of cold war competition between the United States and the Soviet Union to achieve significant milestones in space exploration from the late 1950s to the early 1970s.

Soviet Union

A socialist state that existed from 1922 to 1991 in Eastern Europe and Northern Asia, composed of multiple republics, and led by the Russian Communist Party.

Nuclear Weapons

Explosive devices whose destructive potential derives from nuclear reactions, either fission or a combination of fission and fusion, capable of causing massive destruction.

Soviet Union

Formerly the largest country in the world by area, encompassing multiple republics under a communist government, influential in 20th-century global politics, economy, and culture before its dissolution.