Jack Simmons Is Expecting to Earn a 0

question 104

Multiple Choice

Jack Simmons is expecting to earn a 0.34% return on his investment in a government bond that matures next year. If the inflation rate during the time of maturity is expected to be 7%, what will be the real rate of return from his investment?

• A) 6.64%
• B) - 3.36%
• C) - 6.22%
• D) 25%

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Definitions:

Operating Lease

A leasing arrangement that allows for the use of an asset without transferring ownership rights, typically treated as an operating expense in financial statements.

Long-Term Asset

An asset that is expected to provide economic benefits to a business for more than one fiscal year, such as property, plant, and equipment.

Revenue Expenditure

A type of expenditure that does not result in the acquisition of long-term assets and is rather incurred in the day-to-day operations of a business.

New Equipment

Recently acquired or installed machinery or tools intended for operational or productive use in an organization.