One of the Most Widely Followed Stock Indexes in the United

question 13

Multiple Choice

One of the most widely followed stock indexes in the United States is the Dow Jones Industrial Average.This index represents

• A)the stock prices of 500 large U.S. firms.
• B)an over-the-counter market.
• C)the stock prices of more than 4,000 U.S. firms.
• D)the stock prices of 30 large U.S. corporations.

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Definitions:

Rate of Inflation

The measure of how the general level of prices for goods and services is rising, and, subsequently, how purchasing power is falling over time.

Nominal Interest Rate

The interest rate before adjustments for inflation, representing the raw rate of interest paid on savings or charged on loans.

Real Interest Rate

The rate of interest an investor expects to receive after allowing for inflation, representing the true cost of borrowing and the true yield on investing.