The Consumer Price Index Was 225 in 2006 and 234

question 84

Multiple Choice

The consumer price index was 225 in 2006 and 234 in 2007. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period?

• A)2.5 percent
• B)4.0 percent
• C)6.76 percent
• D)10.5 percent

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Definitions:

Exercise Price

The exercise price is the specified price at which the option holder can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Risk-Free Rate

The rate of return on an investment with no risk of financial loss, typically represented by government bonds.

Inflation Rate

The inflation rate measures the annual percentage increase in the general price level of goods and services in an economy, indicating how quickly prices are rising.

March Put

An options contract which grants the holder the right to sell a specific financial instrument at a predetermined price before or at a specified date in March.