If the Nominal Interest Rate Is 8 Percent and the Inflation

question 54

Multiple Choice

If the nominal interest rate is 8 percent and the inflation rate is 2 percent, the real interest rate is approximately

• A) 4 percent.
• B) 6 percent.
• C) 0.25 percent.
• D) 10 percent.

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Definitions:

Operating Profit

The profit earned from a firm's normal business operations, excluding deductions of taxes and interest.

Markdown

A reduction in the selling price of goods or services, often used as a sales strategy to encourage consumer purchases or to clear older stock.

Mark-up

The difference between the cost of a product or service and its selling price, expressed as a percentage of the cost.

Spoilage

Products or materials that have become unfit for sale or use, often leading to financial loss for a business.