If You Expect the Inflation Premium to Be 2%, the Default

question 68

Multiple Choice

If you expect the inflation premium to be 2%, the default risk premium to be 1% and the real interest rate to be 4%, what interest would you expect to observe in the marketplace under the simplest form of market interest rates?

• A)4%
• B)7%
• C)2%
• D)1%

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Definitions:

Need for Power

A psychological trait described by David McClelland as the desire to influence, teach, or encourage others to achieve.

Need for Affiliation

The desire to form connections with others and be part of a group or community.

Need for Competence

An individual's intrinsic desire to be effective in dealing with the environment and to master complex tasks.

Intrinsic Motivation

A drive to perform an activity for its inherent satisfaction rather than for some separable outcome or external reward.