When Real Rates of Interest Are Positive, It Is Better

question 159

Multiple Choice

When real rates of interest are positive, it is better to be a:

• A) saver than a borrower, because the value of savings and debts are increasing.
• B) borrower than a saver, because the value of savings and debts are increasing.
• C) saver than a borrower, because the value of savings and debts are decreasing.
• D) borrower than a saver, because the value of savings and debts are decreasing.

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Definitions:

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations based on its current income.

Net Income

The amount of profit left over, after all expenses and taxes have been subtracted from total revenue.

Tax Expense

Tax Expense is the total amount of taxes owed by an individual or corporation to the federal, state, and local government, reflecting in the financial statements of the period in which the tax is accrued.

Premium Amortization

The systematic reduction of a premium paid above the par value of a bond, allocated over the bond's life until maturity.