Determine the Nominal Rate of Interest, If the Real Rate

question 57

Multiple Choice

Determine the nominal rate of interest, if the real rate is 6% and the inflation rate is 1.85%.

• A)8.84%
• B)7.96%
• C)6.75%
• D)3.24%

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Definitions:

Absorption Costing

A pricing strategy that encompasses all expenses associated with production, including direct materials, direct labor, as well as both variable and fixed overhead costs, in the product's price.

Operating Income

A measure of a company's profitability from its core business operations, excluding revenue and expenses from non-operational activities.

Variable Costing

A costing method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, excluding fixed manufacturing overhead.

Operating Income

Earnings generated from a company's standard business operations, excluding income from investments and other non-operational sources.