If the Real Rate of Return Is 3 Percent, and the Inflation

question 140

Multiple Choice

If the real rate of return is 3 percent, and the inflation rate is 4 percent, then the nominal interest rate must be:

• A) −1 percent.
• B) 1 percent.
• C) 7 percent.
• D) −7 percent.

---

Definitions:

Physical Inventory

The process of counting by hand the actual inventory of a business at a specific point in time.

Net Income

The net income of a business following the deduction of all costs, taxes, and expenses from its total earnings.

Gross Profit Rate

The gross profit rate is a financial metric indicating the percentage of revenue that exceeds the cost of goods sold, showcasing the efficiency of a company in managing its production costs.

Merchandise Inventory

Goods a company intends to sell in the normal course of business, tracked in an account for accounting and management purposes.