Given a Nominal Interest Rate of 7% and an Inflation

question 90

Multiple Choice

Given a nominal interest rate of 7% and an inflation rate of 2.5%,what is the real interest rate?

• A)4.4%
• B)4.0%
• C)7%
• D)2.5%
• E)9.5%

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Definitions:

Understatement

An error in financial reporting where the value of a figure is reported lower than its actual amount.

Inventory Turnover

A measure of how frequently a company's inventory is sold and replaced over a period.

Cost of Goods Sold

Expenses directly related to manufacturing goods for sale by a business, covering both material and labor expenses.

Inventory

The raw materials, work-in-progress goods, and completely finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale.