If a Share of Stock Provided a 14

question 11

Multiple Choice

If a share of stock provided a 14.0% nominal rate of return over the previous year while the real rate of return was 6.0%,then the inflation rate was:

• A) 1.89%.
• B) 7.55%.
• C) 8.00%.
• D) 9.12%.

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Definitions:

Numeraire

A standard unit of account in which prices and values are expressed; it serves as a measure for comparing the worth of goods or services.

Endowed

Provided with a quality, ability, or asset.

Perfect Substitutes

Goods that can be used in place of each other with no loss of utility by the consumer.

Perfect Complements

Goods that are always used together in fixed proportions, where an increase in demand for one leads to a corresponding increase in demand for the other.