If You Expect the Inflation Rate to Be 5 Percent

question 93

Multiple Choice

If you expect the inflation rate to be 5 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) -12 percent.
• B) -2 percent.
• C) 2 percent.
• D) 12 percent.

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Definitions:

Mediator

An impartial individual who assists in resolving disputes between parties through structured conversation and negotiation, aiming for mutual agreement.

Actions

Specific deeds or measures taken in pursuit of an objective or in response to a situation.

Decreased Sleep

A reduction in the total amount of sleep a person gets, which can impact their overall health and functioning.

Suicidal Ideation

Refers to the consideration or planning of suicide, without the act necessarily being carried out.