If the Nominal Interest Rate Is 5 Percent and There

question 316

Multiple Choice

If the nominal interest rate is 5 percent and there is a deflation rate of 2 percent, what is the real interest rate?

• A)7 percent
• B)5 percent
• C)3 percent
• D)3/5 percent

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Definitions:

Ordinary Income

Income earned through standard operations, including wages, salaries, commissions, and interest income, typically taxed at normal rates.

Schedule C

A document sole proprietors utilize to declare their business earnings and deductions to the IRS.

Form 1040

The typical form distributed by the Internal Revenue Service (IRS) for individuals to use when filing their yearly tax returns on income.

Straight-Line Depreciation

A method of calculating the depreciation of an asset by evenly spreading its cost over its useful life.