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:

Bismarck's Policy

The political strategies and foreign policies implemented by Otto von Bismarck, Chancellor of the German Empire, aimed at achieving German unification and maintaining European stability through diplomacy and the balance of power.

Catholicism

The branch of Christianity headed by the Pope, based in Rome, and characterized by its traditions, teachings, and practices.

German Emperor

The title used for the monarch and head of state of Germany, particularly associated with the rulers of the German Empire from 1871 to 1918.

William II

William II, also known as Wilhelm II, was the last German Emperor (Kaiser) and King of Prussia, ruling from 1888 until his abdication in 1918.