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:

Credit Worthiness

An assessment of a borrower's ability to repay debts based on their financial history, credit score, and other factors.

Abnormal Earnings

Profits exceeding or falling short of the normal expected earnings due to unusual or non-recurring items, not indicative of a company's ongoing operational performance.

Actual Earnings

Actual earnings are the real profits that a company generates during a specific period, as reported in its financial statements.

Unproductive Capital

Capital investments that do not effectively contribute to the business's profitability or growth objectives.