If the Nominal Interest Rate Is 4

question 39

Multiple Choice

If the nominal interest rate is 4.2 percent and the rate of inflation is -0.5 percent,then the real interest rate is

• A)-8.4 percent.
• B)-2.1 percent.
• C)3.7 percent.
• D)4.7 percent.

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Definitions:

Accounts Receivable

Financial dues from customers to a firm for goods or services that have been dispensed or availed but remain unpaid.

Inventory

An accounting term referring to goods and materials held by a business for the purpose of sale or production.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.

Operating Cash Flows

Operating cash flows refer to the amount of cash generated by a company's normal business operations, intended to sustain and grow the business.