The Real Interest Rate Is Negative If the Inflation Rate

question 52

Multiple Choice

The real interest rate is negative if the inflation rate

• A)exceeds the nominal interest rate.
• B)exceeds the real interest rate.
• C)is equal to the nominal interest rate.
• D)is less than the nominal interest rate.
• E)equals zero.

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Definitions:

Capital Projects

Large, longer-term investments undertaken by a business or government to create, maintain, or expand its operational capacity.

New Business

A newly established company or enterprise that is in the early stages of operation and growth.

NPV

Net Present Value, a calculation that compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account.

IRR Methods

Internal Rate of Return methods are used in capital budgeting to estimate the profitability of potential investments.