If the Real Return on Government Bonds Is 14 Percent

question 43

Multiple Choice

If the real return on government bonds is 14 percent while the rate of expected inflation is anticipated to be 8 percent, then what should nominal rate of return be?

• A) 14.00%
• B) 33.00%
• C) 23.12%
• D) all of the above

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Definitions:

Owner's Capital

The amount of equity a proprietor has in the business, representing the difference between the business's assets and liabilities.

Prepaid Expenses

Expenses paid in advance for goods or services to be received in the future.

Adjusting Journal Entry

An accounting entry made at the end of an accounting period to allocate income and expenditures to the appropriate period.

Wages Expense

Costs incurred by a company for the payment of wages to its employees, typically reported on the income statement.