Hugh Wallace Has the Following Information Regarding Three Investment Options

question 40

Multiple Choice

Hugh Wallace has the following information regarding three investment options. Each investment option involves the same one-year period. Which of the following statements regarding these investment options is true?

• A) Investment option 1 has the highest nominal rate of return.
• B) The expected percent rate of interest during the time of maturity of investment option 3 is 1.48%.
• C) Investment option 3 has the highest expected inflation rate and the lowest real rate of return.
• D) Adjusted for inflation, investment option 1 is the best choice for Hugh.

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Definitions:

Vestibule

An entrance hall inside a building which leads to various rooms or spaces, or in anatomy, a space or cavity at the entrance of a canal, notably within the ear or nose.

Nasopharynx

The upper part of the pharynx, connecting the nasal cavity above the soft palate to the oropharynx.

Auditory Tube

Also known as the Eustachian tube, it connects the middle ear to the back of the nasopharynx, helping equalize air pressure on both sides of the eardrum.

Tympanic Cavity

An air-filled space in the temporal bone of the skull behind the eardrum that contains the bones of the middle ear.