If the Real Rate of Return Is 2 Percent, and the Inflation

question 75

Multiple Choice

If the real rate of return is 2 percent, and the inflation rate is 2 percent, then the nominal interest rate must be:

• A) 4 percent.
• B) 2 percent.
• C) −2 percent.
• D) −4 percent.

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Definitions:

Economic Value Added

A financial performance metric that calculates the value a company generates from its capital investments, beyond the cost of capital.

Weighted Average Cost Of Capital

The overall rate of return that a company is expected to pay on average to all its security holders to finance its assets.

Market Value Of Equity

The total dollar value of a company's shares of stock on the open market.

Employee Absenteeism

The habitual non-presence of an employee at work, which can affect productivity and operational efficiency.