When the Real Interest Rate Is Less Than Zero, Then

question 19

Multiple Choice

When the real interest rate is less than zero, then:

• A)a creditor will gain purchasing power.
• B)a creditor will just break even on his or her real loan return.
• C)a creditor will lose purchasing power.
• D)a creditor will benefit from inflation.
• E)a creditor's purchasing power will not be affected, because the nominal interest rate is greater than zero.

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Definitions:

Financing Activities

Transactions that result in changes in the size and composition of the equity capital or borrowings of the entity.

Statement Of Cash Flows

A financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.

Net Cash

The amount of cash available after all cash inflows and outflows have been accounted for.

Financing Activities

Transactions and business events that involve raising capital and repaying investors, including issuing equity and debt, dividend payments, and loan repayments.