If the Bank Offers You a Nominal Interest Rate of 9

question 90

Multiple Choice

If the bank offers you a nominal interest rate of 9 percent on a student loan, and if inflation is 6 percent, then what is the real interest rate?

• A) 15 percent.
• B) 9 percent.
• C) 6 percent.
• D) 3 percent.

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Definitions:

Adjusting Entry

A journal entry made at the end of the accounting period to allocate income and expenditure to the correct period.

Accounting Period

denotes the specific period of time covered by financial statements, typically a year or a quarter.

Liability Insurance

Insurance that provides protection against claims resulting from injuries and damage to people and/or property.

Prepaid Insurance

An asset account representing insurance payments made in advance for future coverage periods.