If You Borrow Money at a Nominal Interest Rate of 5

question 104

Multiple Choice

If you borrow money at a nominal interest rate of 5 percent and the inflation rate is 10 percent,what real interest rate will you pay?

• A) -5 percent
• B) 0.5 percent
• C) 2 percent
• D) 5 percent
• E) 10 percent

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.

Dividend Yield

A metric indicating the annual dividends a firm distributes in relation to its share price.

Asset Turnover

A financial ratio indicating how efficiently a company uses its assets to generate revenue.

Inventory Turnover

is a ratio showing how many times a company's inventory is sold and replaced over a specific period, highlighting the efficiency of inventory management.