If Your Nominal Income in 1998 Is $50,000,and Prices Increase

question 24

Multiple Choice

If your nominal income in 1998 is $50,000,and prices increase by 50% between 1998 and 2008,then to have the same real income,your nominal income in 2008 must be

• A)$50,000.
• B)$75,000.
• C)$100,000.
• D)$150,000.

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Definitions:

Arbitrage Profits

Profits generated from exploiting price differences of the same asset in different markets, buying low in one and selling high in another.

Risk Management

The process of identifying, assessing, and prioritizing risks followed by the application of resources to minimize, control, or eliminate them.

Volatility

Volatility refers to the rate at which the price of a security increases or decreases for a given set of returns, indicating the risk or uncertainty of changes in value.

Interest Rate Swap

A financial derivative instrument in which two parties exchange interest rate payments on specified principal amounts over a certain period.