Over the Past Year, You Earned a Nominal Rate of Interest

question 78

Multiple Choice

Over the past year, you earned a nominal rate of interest of 14% on your money. The inflation rate was 2% over the same period. The exact actual growth rate of your purchasing power was

• A) 11.76%.
• B) 16.00%.
• C) 15.02%.
• D) 14.32%.

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Definitions:

Accounting Principle

Fundamental guidelines or rules that govern the process of accounting and financial reporting, ensuring consistency and comparability of financial data.

Extraordinary Items

Events or transactions that are both unusual in nature and infrequent in occurrence, significantly affecting a company's financial position and reported separately in financial statements to provide clarity.

Percentage Change

A measure expressing the relative difference between a new value and an old value, often used to describe changes in financial or statistical data.

Gross Profit

The financial performance metric that subtracts the cost of goods sold from total revenue, indicating the efficiency of the core business activities.