An Investor Wants to Be Able to Buy 4% More

question 4

Multiple Choice

An investor wants to be able to buy 4% more goods and services in the future in order to induce her to invest today. During the investment period prices are expected to rise by 2%. Which statement(s) below is/are true?
I. 4% is the desired real rate of interest
II. 6% is the approximate nominal rate of interest required
III. 2% is the expected inflation rate over the period

• A) I only
• B) II only
• C) III only
• D) I and II only
• E) I, II, and III are true

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Definitions:

Ferns

A group of non-flowering plants that reproduce via spores, featuring large leaves and lacking seeds and flowers.

Rhizoids

Thin, root-like structures found in non-vascular plants, fungi, and some protists, serving primarily for attachment and in some cases, absorption.

Sporophyte

The diploid, spore-producing phase of plants and algae that undergo alternation of generations, in contrast to the haploid gametophyte phase.

Diatoms

Single-celled, photosynthetic protists with a two-part silica shell.