The Real Rate of Interest Is 5% and the Anticipated

question 415

Multiple Choice

The real rate of interest is 5% and the anticipated rate of inflation is 2%. What is the nominal rate of interest?

• A) 7%
• B) 5%
• C) 3%
• D) 2%

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Definitions:

Estimable

Capable of being estimated or approximated in magnitude or extent.

Remote

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Contingent Liability

A possible financial duty that could emerge in the future, contingent on the result of a certain event.

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A term used in accounting and finance to describe events or outcomes that are likely to happen or transactions that are likely to occur.