In 1999,the Nominal Interest Rate on a 30-Year Bond Was

question 176

Multiple Choice

In 1999,the nominal interest rate on a 30-year bond was around 5.85 percent.Assuming that investors have set these contracts expecting a real interest rate of 3 percent,what is the average rate of inflation that investors in the market are expecting over the next thirty years?

• A)2.85 percent
• B)3 percent
• C)5.85 percent
• D)8.85 percent

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Definitions:

Long-lasting Effect

A durable impact or outcome that remains over a long period of time, often beyond the expected or typical duration.

Pituitary Gland

An endocrine gland located below the hypothalamus; secretes several hormones that influence a wide range of physiological processes.

Hypothalamus

A region of the brain responsible for producing hormones that regulate bodily functions such as temperature, hunger, and emotional responses.

Neurophysiological Changes

Modifications in the function and structure of the nervous system due to development, injury, or disease.