If You Are Promised a Nominal Return of 12% on a One

question 83

Multiple Choice

If you are promised a nominal return of 12% on a one year investment,and you expect the rate of inflation to be 3%,what real rate do you expect to earn?

• A) 5.48%
• B) 8.74%
• C) 9.00%
• D) 12.00%

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Definitions:

Price

The amount of money expected, required, or given in exchange for an item or service in a market.

Normal Good

A good for which demand increases as the income of consumers increases, and vice versa.

Income

Revenue generated on a regular basis from labor or investments.

Demand Curve

A graph showing how the quantity demanded of a commodity changes as its price varies.