Which of the Following Statements Is Correct About the Relationship

question 107

Multiple Choice

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

• A)The real interest rate is the nominal interest rate times the rate of inflation.
• B)The real interest rate is the nominal interest rate minus the rate of inflation.
• C)The real interest rate is the nominal interest rate plus the rate of inflation.
• D)The real interest rate is the nominal interest rate divided by the rate of inflation.

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Definitions:

Index Model

A statistical model used to predict stock prices by relating the returns of each stock to the returns of an overall market index.

Standard Deviation

A measure of the dispersion of a set of data from its mean, indicating how spread out the data points are.

Return

A measure of the income generated by an investment relative to its cost, often expressed as a percentage.

Regression Equation

A statistical formula used to predict the value of a dependent variable based on one or more independent variables.