If the Nominal Interest Rate Is 5 Percent and the Rate

question 256

Multiple Choice

If the nominal interest rate is 5 percent and the rate of inflation is 2 percent, then the real interest rate is

• A)7 percent.
• B)3 percent.
• C)2.5 percent.
• D).4 percent.

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Definitions:

Quick Ratio

A measure of a company's capacity to meet its short-term liabilities with its most liquid assets.

Liquidity Ratio

A financial metric used to determine an entity's ability to pay off its short-term debts with its most liquid assets, indicating financial health.

Current Ratio

A financial metric indicating a firm's capacity to meet its immediate financial liabilities with its present assets.

Net Cash

The amount of cash available after deducting liabilities, often considered in evaluating a company's liquidity.