Suppose You Deposit $10 000 in a Bank That Yields

question 77

Multiple Choice

Suppose you deposit $10 000 in a bank that yields a nominal interest rate of 8 per cent. If you expect inflation to be 6 per cent or lower, then you are expecting to earn a real interest rate of at least:

• A) 1.6 per cent.
• B) 2 per cent.
• C) 4 per cent.
• D) 5 per cent.

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Definitions:

Allocation Basis

A method or principle used to distribute costs or revenues among various accounts or periods.

Weighted-Average Method

An inventory costing method that assigns a cost to inventory on the basis of the average cost of all similar items in inventory, weighted by the quantity of each item.

Direct Materials Cost

The cost of raw materials and components that go directly into the production of a product.

Work In Process Inventory

The value of all the materials, labor, and overhead costs for products that are partially completed by a company.