Looking at Real and Nominal Interest Rates in Australia Since

question 12

Multiple Choice

Looking at real and nominal interest rates in Australia since 1971,we see that the

• A)real interest rate has been greater than 10 per cent for most years.
• B)real interest rate has at times been negative.
• C)nominal interest rate has at times been negative.
• D)real interest is generally greater than the nominal interest rate.
• E)real interest rate was above 5 per cent during the low inflation of the 1990s.

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Definitions:

Standard Deviation

A statistical measure of the dispersion or variability of a set of data points around the mean, commonly used to quantify the amount of variation.

Average Rate

The mean value of a set of rates, capturing the central tendency over a specified period or dataset.

Probability

A measure of the likelihood that an event will occur, expressed as a number between 0 and 1.

Variance of Returns

A measure of the dispersion or spread of returns on an investment, indicating its volatility.