Given a Nominal Interest Rate of 3% and an Inflation

question 74

Multiple Choice

Given a nominal interest rate of 3% and an inflation rate of 4.5%,what is the real interest rate?

• A)3%
• B)0%
• C)-1.4%
• D)1.5%
• E)7.5%

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Definitions:

Personal Casualty Losses

Financial losses suffered from the sudden, unexpected, or unusual damage or loss of property due to events like natural disasters, that may be deductible under certain conditions.

Deductibility

The ability of an expense to be subtracted from gross income, reducing taxable income and the amount of tax owed.

Investment Interest Expense

Interest paid on money borrowed to purchase taxable investments, potentially deductable up to the amount of net investment income.

Net Investment Income

The income received from investment assets (like dividends, interest, and capital gains) after deducting related expenses.