The Real Risk-Free Rate Is Affected by Two Factors

question 26

Multiple Choice

The real risk-free rate is affected by two factors:

• A) the relative ease or tightness in capital markets and the expected rate of inflation.
• B) the expected rate of inflation and the set of investment opportunities available in the economy.
• C) the relative ease or tightness in capital markets and the set of investment opportunities available in the economy.
• D) time preference for income consumption and the relative ease or tightness in capital markets.
• E) time preference for income consumption and the set of investment opportunities available in the economy.

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Definitions:

Annual Budget

A financial document used to project future income and expenses over the course of a year.

Pie Chart

A circular statistical graphic divided into slices to illustrate numerical proportion, where the arc length of each slice corresponds to the quantity it represents.

Pictogram

Chart that portrays data as symbols instead of words or numbers.

Surface Chart

Form of line chart with a cumulative effect; all the lines add up to the top line, which represents the total.