If the Nominal Interest Rate Is 1

question 326

Multiple Choice

If the nominal interest rate is 1.5 percent and the rate of inflation is -0.5 percent, then the real interest rate is

• A)-4 percent.
• B)-2 percent.
• C)1 percent.
• D)2 percent.

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Definitions:

Risk-free Rates

Theoretical return rates on an investment assumed to have no risk of financial loss, typically represented by the yield on government securities.

Spot Exchange Rate

The spot exchange rate is the current price at which one currency can be exchanged for another for immediate delivery.

Futures Price

Futures Price is the agreed-upon price for the purchase or sale of a particular asset at a future date, determined in the futures market.

Stock Index Futures

Futures contracts to buy or sell a specific stock index at a predetermined price on a specified future date, used for hedging or speculating on the direction of the stock market.