The Nominal Interest Rate

question 47

Multiple Choice

The nominal interest rate:

• A) is set by Congress.
• B) is equal to the rate of inflation.
• C) always is equal to the 10-year bond rate of return.
• D) is the opportunity cost of holding money.
• E) is constant.

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Definitions:

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating how much contributes to covering the fixed costs.

Break-even Sales

The amount of revenue needed to cover both fixed and variable costs, resulting in no profit or loss.

Variable Cost

Costs that change in proportion to the level of goods or services produced, such as materials and labor directly involved in production.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the degree to which a company can increase profits by increasing sales.