If the Nominal Interest Rate Is 5 Percent and There

question 211

Multiple Choice

If the nominal interest rate is 5 percent and there is a deflation rate of 3 percent,what is the real interest rate?

• A)8 percent
• B)2 percent
• C)15 percent
• D)1.7 percent

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Definitions:

Return On Investment

A metric for assessing the effectiveness or profit gained from an investment, determined by dividing the net income by the investment's cost.

Residual Income

The income that an investment or business generates after accounting for the cost of capital.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating how much contributes to covering fixed costs and generating profit.

Segment Margin

The amount of profit or loss generated by a particular segment of a business, helping to assess the financial contribution of different parts of the business.