A Bond Yielded a Real Rate of Return of 3

question 92

Multiple Choice

A bond yielded a real rate of return of 3.87 percent for a time period when the inflation rate was 3.75 percent.What was the actual nominal rate of return?

• A)87.58 percent
• B)7.62 percent
• C)7.77 percent
• D)8.28 percent
• E).36 percent

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Definitions:

Common Shares

Equity investments representing ownership rights in a corporation, entitling holders to vote on company matters and receive dividends.

Lowest Terms

The simplest form of a fraction, where the numerator and denominator are reduced to their smallest values.

Purchasing Power

The value of currency expressed in terms of the amount of goods or services that one unit of money can buy.

CPI

This index, named the Consumer Price Index, assesses the cumulative weighted prices of a collection of consumer-related goods and services, with categories including transportation, healthcare, and food.