If You Expect the Inflation Rate to Be 12 Percent

question 32

Multiple Choice

If you expect the inflation rate to be 12 percent next year and a one-year bond has a yield to maturity of 7 percent,then the real interest rate on this bond is

• A)-5 percent.
• B)-2 percent.
• C)2 percent.
• D)12 percent.

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Definitions:

Estimating Value

The process of determining an item's worth or the fair market value of assets, often used in finance and real estate.

Inventory

The total amount of goods and materials held by a business for the purpose of resale, manufacturing, or repair.