When the real rate of interest is less than the nominal rate of interest, then: A....
When the real rate of interest is less than the nominal rate of interest, then:
A. inflation must be added to the nominal rate.
B. investment returns do not increase purchasing power.
C. nominal flows should be discounted with real rates.
D. inflation is expected to occur.
Homework Answers
A nominal rate of interest is inflation added to real interest rate, i.e Nominal rate =Real rate+inflation rate, thus the answer is:-
D. inflation is expected to occur.
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When the real rate of interest is less than the nominal rate of
interest, then:
A....
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