The Expected Inflation Rate in Finland Is 2 Percent While

question 42

Multiple Choice

The expected inflation rate in Finland is 2 percent while it is 4 percent in the U.S.A risk-free asset in the U.S.is yielding 5.5 percent.What real rate of return should you expect on a risk-free Norwegian security?

• A)2.0%
• B)2.5%
• C)3.0%
• D)3.5%
• E)4.0%

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Definitions:

Real Estate Market

The market segment in which land and the buildings on it are bought, sold, or rented, involving residential, commercial, and industrial properties.

Capital Structure

The mix of different forms of external funds and equity that a company uses to finance its operations and growth.

Debt and Equity

Two of the main ways companies can raise capital; debt involves borrowing money, whereas equity involves selling a stake in the company.

Equity Account

An account that represents the owner's equity or interest in a company, usually comprising investments made by the shareholders and retained earnings.