If a Bond Provides a Real Rate of Return of 2.89

question 62

Multiple Choice

If a bond provides a real rate of return of 2.89 percent at a time when inflation is 3.21 percent,what is the nominal rate of return on the bond?

• A)6.10 percent
• B)6.13 percent
• C)6.16 percent
• D)6.19 percent
• E)6.22 percent

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Definitions:

Earnings Per Share

A company's profit divided by the number of outstanding shares of its common stock, indicating the company's profitability on a per-share basis.

Cash Coverage Ratio

A liquidity ratio that measures a company’s ability to pay off its debt with cash and cash equivalents, indicating financial health.

Operating Activities

The section of a company's cash flow statement that reveals the cash generated or used in the company’s primary business operations.

Interest Expense

The expense an entity faces for using borrowed capital over a specific time frame.