If You Expect the Inflation Rate to Be 12 Percent

question 32

Multiple Choice

If you expect the inflation rate to be 12 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)-5 percent.
• B)-2 percent.
• C)2 percent.
• D)12 percent.

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Definitions:

Native Population

The indigenous peoples or original inhabitants of a particular geographical region.

Spiritual Perfection

A state of complete harmony and development in an individual's spiritual life, often pursued through various religious or philosophical practices.

Moral Obligation

A duty which one is morally compelled to perform based on ethical principles and understanding of right and wrong.

Hindu

Relating to Hinduism, a major world religion originating on the Indian subcontinent and comprising various philosophies, beliefs, and rituals.