To Obtain a Given Real Rate of Return, Lenders Must

question 126

Multiple Choice

To obtain a given real rate of return, lenders must charge a ________ nominal interest rate in the face of decreasing inflation.

• A)regular
• B)higher
• C)lower
• D)constant

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Definitions:

Option Contract

A financial contract that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price within a certain period.

Right

In finance, the prerogative to buy or sell a security under specific conditions, often associated with options.

Specific Asset

An identifiable and tangible asset owned by a company, often critical to its operations or unique in nature, usually with specific investment criteria.

Swap Contract

A swap contract is a financial derivative agreement between two parties to exchange sequences of cash flows for a set period of time.