Real Rates of Return Are Typically Less Than Nominal Rates

question 84

Multiple Choice

Real rates of return are typically less than nominal rates of return due to:

• A) inflation.
• B) capital gains.
• C) dividend payments.
• D) depreciation.

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Definitions:

Compounded Semiannually

This term refers to the process of calculating interest on a principal amount where the interest is added to the principal to compute further interest, occurring twice a year.

Loan

A sum of money borrowed that is expected to be paid back with interest.

Annual Interest Rate

The percentage of interest that will be charged or earned on a sum of money over a one-year period.

Tenth Year-end Deposit

The act of placing funds into a financial account or investment at the end of the tenth year of the account or investment's existence.