If the CPI Is 170 at the Beginning of the Year

question 83

Multiple Choice

If the CPI is 170 at the beginning of the year and 181 at the end,and a bank is paying a nominal interest rate of 6 percent,we see that

• A)the real interest rate is negative.
• B)the interest nominal rate is negative.
• C)the real interest rate is positive and is less than 1 percent.
• D)the real interest rate is positive and is larger than 1 percent.
• E)the real interest rate is equal to zero.

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Definitions:

Invested

The act of allocating money or capital to an endeavor with the expectation of obtaining an additional income or profit.

Annuity

An annuity is a financial product that pays out a fixed stream of payments to an individual, typically used as an income stream for retirees.

Payments

Transactions made by individuals or entities to fulfill obligations or purchase goods and services.

Compounded Monthly

A method of calculating interest where the interest earned each month is added to the principal, thus earning interest in subsequent months.