What Has Been the Average Annual Real Rate of Interest

question 74

Multiple Choice

What has been the average annual real rate of interest on Treasury bills over the past 111 years (from 1900 to 2011) ?

• A)Less than 2%
• B)Between 2% and 3%
• C)Between 3% and 4%
• D)Greater than 4%

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Definitions:

Pre-tax Cost

The expense or cost associated with an investment or project before any taxes are deducted.

Marginal Tax Rate

The rate at which your last dollar of income is taxed, indicating the percentage of tax applied to your next dollar of taxable income.

Coupons

The interest payments made to bondholders, typically on an annual or semi-annual basis.