Hugh Wallace Has the Following Information Regarding Three Investment Options

question 39

Multiple Choice

Hugh Wallace has the following information regarding three investment options.Each investment option involves the same one-year period. Which of the following statements regarding these investment options is true?

• A) Investment option 1 has the highest nominal rate of return.
• B) The expected percent rate of interest during the time of maturity of investment option 3 is 1.48%.
• C) Investment option 3 has the highest expected inflation rate and the lowest real rate of return.
• D) Adjusted for inflation,investment option 1 is the best choice for Hugh.

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Definitions:

Resource Consumption

The amount of resources used up in the production of goods or services.

Activity-Based Costing

An accounting methodology that assigns costs to products or services based on the activities and resources that contribute to their production.

Activity Cost Pools

Groupings of individual costs associated with particular activities, used in activity-based costing to allocate costs more accurately.

Machining Activity Pool

A collection of all costs related to machining operations, used in activity-based costing to allocate costs based on actual usage.