If You Expect the Inflation Rate to Be 4 Percent

question 77

Multiple Choice

If you expect the inflation rate to be 4 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)-3 percent.
• B)-2 percent.
• C)3 percent.
• D)7 percent.

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Definitions:

Net Sales

The revenue from goods or services sold after deducting returns, allowances for damaged or missing goods, and discounts.

Average Total Assets

a metric calculated by dividing the sum of assets at the beginning and end of a period by two, used to measure a company's asset efficiency.

Plant Assets

Long-term tangible assets used in the production process of a business, including machinery, buildings, and equipment.

General Journal Entries

Accounting records that are used to document business transactions in the general ledger in chronological order.