What Does It Mean If the Purchasing Power in 1950

question 78

Multiple Choice

What does it mean if the purchasing power in 1950 was $4.15 relative to the 1982 base year?

• A)It took $4.15 in 1950 to buy what $1 bought in 1982.
• B)The average price level in 1982 was five times as high as in 1950.
• C)$4.15 in 1950 had the same nominal money value as $1 in 1982.
• D)It took $4.15 in 1982 to buy what $1 bought in 1950.
• E)Nominal prices have increased by more than 400 percent between 1950 and 1982, but the real value of money has not changed.

Identify strategies to protect against interest rate changes.

Grasp the concept and daily process of marking-to-market in futures contracts.

Understand the structure and comparison of various financial instruments with credit default swaps.

Differentiate between long hedges and short hedges in the futures market.

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Definitions:

Bond Premium

The amount by which the market price of a bond exceeds its face value, often occurring when the bond's interest rate is higher than current market rates.

Semiannual Interest

Interest on a loan or security that is calculated and paid twice a year.

Straight-line Method

A depreciation technique that allocates an equal amount of depreciation each year over an asset's useful life.

Times Interest Earned Ratio

A financial metric used to determine how well a company can meet its interest obligations based on current earnings.