If the Current Inflation Rate Is 3

question 58

Multiple Choice

If the current inflation rate is 3.6% and you have an investment opportunity that pays 10.9%, then the real rate of interest on your investment is closest to ________.

• A) 8.5%
• B) 9.9%
• C) 11.3%
• D) 7.0%

---

Definitions:

Housing Bust

A rapid and significant decline in the housing market, characterized by falling home prices and increased foreclosures.

Regulatory Policies

Laws and rules instituted by governments to control or manage certain activities, industries, or market practices.

Mal-investment

Investment in wrong or unproductive activities usually due to poor information, misaligned incentives, or manipulation of prices.

Adjustable Rate Mortgages

A type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan.