Assume Investors Demand a Real Rate of Return Equal to 3

question 42

Multiple Choice

Assume investors demand a real rate of return equal to 3 percent and that there is no maturity risk premium associated with Treasury securities.According to the Wall Street Journal,the average nominal yields on risk-free Treasury securities with different maturities are:
Type of security
Yield1-year
4) 5%2-year
4) 63-year
4) 84-year
5) 0What is the one-year nominal interest rate and the inflation premium that is expected in Year 4?

• A) 5.0%;2.0%
• B) 4.5%;1.5%
• C) 3.0%;1.8%
• D) 5.6%;2.6%
• E) There is not enough information to answer this question.

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Definitions:

Management by Walking Around

A leadership approach where managers informally walk around the office to check on the work status of employees, engage in conversations, and foster a more open and accessible organizational environment.

Filtering

The process by which information is selectively chosen or modified before it is communicated to others, often to avoid negative reactions or to manipulate perceptions.

Grapevine

An informal communication network within an organization, where information, rumors, and gossip are spread beyond official channels.

Management by Walking Around

A management style where leaders informally check in with employees, gather insights, and foster open communication by literally walking around the workplace.