The XYZ Corporation Determines It Can Make a Real (Inflation-Adjusted)

question 28

Multiple Choice

The XYZ Corporation determines it can make a real (inflation-adjusted) return on an investment of 9 percent. The nominal rate of interest is 13 percent and the rate of inflation is 7 percent. We can conclude that the

• A) investment will be profitable.
• B) investment will be unprofitable.
• C) real rate of interest is 4 percent.
• D) real rate of interest is 2 percent.