What Is the Expected Real Rate of Interest for an Account

question 81

Multiple Choice

What is the expected real rate of interest for an account that offers a 12 percent nominal rate of return when the rate of inflation is 6 percent annually?

• A)5.00 percent
• B)5.66 percent
• C)6.00 percent
• D)9.46 percent 1 + real rate = 1.12/1.06

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Definitions:

Spending Variance

The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost. A favorable (unfavorable) spending variance occurs because the cost is lower (higher) than expected, given the actual level of activity for the period.

Static Planning Budget

A budget based on a fixed level of activity that does not change with actual levels of output, sales, or other activity measures.

Controlled Costs

Costs that can be influenced or managed by decisions made by managers or company officials.

Actual Costs

Actual costs refer to the genuine expenses incurred in the production, acquisition, or sale of products or services, including materials, labor, and overhead expenses.