Suppose That You Borrow $10,000 for One Year, and at the End

question 418

Multiple Choice

Suppose that you borrow $10,000 for one year, and at the end of the year, you must repay $10,450. Also, during that year inflation was 2.5%. The real interest rate is

• A) 12.0 percent.
• B) 7.0 percent.
• C) 4.5 percent.
• D) 2.0 percent.

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Definitions:

Tender Offer

A proposal made by an investor or another company to purchase a substantial amount of a company's shares directly from its shareholders.

Corporate Raider

An investor who buys a large number of shares in a corporation with the aim to gain control of it and make changes to increase its value.