5. If the annual real rate of interest is 5% and the expected inflation rate is...

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Finance

5. If the annual real rate of interest is 5% and the expectedinflation rate is 4%, the nominal rate of interest would beapproximately
A. 1%.
B. 9%.
C. 20%. D. 15%. E. 7%.
6. If the annual real rate of interest is 2.5% and theexpected inflation rate is 3.7%, the nominal rate of interest wouldbe approximately
A. 3.7%.
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B. 6.2%. C. 2.5%. D. ?1.2%. E. 4.3%.
7. You purchased a share of stock for $20. One year later youreceived $1 as a dividend and sold the share for $29. What was yourholding-period return?
A. 45%
B. 50%
C. 5% D. 40% E. 32%
8. You purchased a share of stock for $30. One year later youreceived $1.50 as a dividend and sold the share for $32.25. Whatwas your holding-period return?
A. 12.5%
B. 12.0%
C. 13.6% D. 11.8% E. 14.1%
9. Which of the following determine(s) the level of realinterest rates? I) The supply of savings by households and businessfirms.
II) The demand for investment funds.
III) The government's net supply and/or demand forfunds.
A. I only.
B. II only.
C. I and II only. D. I, II, and III. E. III only.
10. Which of the following statement(s) is (are) true?
I) The real rate of interest is determined by the supply anddemand for funds.
II) The real rate of interest is determined by the expectedrate of inflation.
III) The real rate of interest can be affected by actions ofthe Fed.
IV) The real rate of interest is equal to the nominal interestrate plus the expected rate of inflation. A. I and II only.
B. I and III only.
C. III and IV only.
D. II and III only.
E. I, II, III, and IV only.
11. Which of the following statements is true?
A. Inflation has no effect on the nominal rate ofinterest.
B. The realized nominal rate of interest is always greaterthan the real rate of interest.
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C. Certificates of deposit offer a guaranteed real rate ofinterest.
D. Certificates of deposit offer a guaranteed nominal rate ofinterest.
E. Inflation has no effect on the nominal rate of interest,the realized nominal rate of interest is always greater than thereal rate of interest, and certificates of deposit offer aguaranteed real rate of interest.
12. Other things equal, an increase in the government budgetdeficit A. drives the interest rate down.
B. drives the interest rate up.
C. might not have any effect on interest rates.
D. always increases business prospects. E. never increasesbusiness prospects.
13. Ceteris paribus, a decrease in the demand for loanablefunds A. drives the interest rate down.
B. drives the interest rate up.
C. might not have any effect on interest rates.
D. results from an increase in business prospects and adecrease in the level of savings. E. results from an increase inbusiness prospects and a increase in the level of savings.

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4.1 Ratings (803 Votes)

5 The answer is B9 The approximate nominal interest rate can be calculated by adding real interest rate and expected inflation rate approximate nominal interest rate real interest rate expected inflation rate See Answer

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5. If the annual real rate of interest is 5% and the expectedinflation rate is 4%, the nominal rate of interest would beapproximatelyA. 1%.B. 9%.C. 20%. D. 15%. E. 7%.6. If the annual real rate of interest is 2.5% and theexpected inflation rate is 3.7%, the nominal rate of interest wouldbe approximatelyA. 3.7%.Page | 2B. 6.2%. C. 2.5%. D. ?1.2%. E. 4.3%.7. You purchased a share of stock for $20. One year later youreceived $1 as a dividend and sold the share for $29. What was yourholding-period return?A. 45%B. 50%C. 5% D. 40% E. 32%8. You purchased a share of stock for $30. One year later youreceived $1.50 as a dividend and sold the share for $32.25. Whatwas your holding-period return?A. 12.5%B. 12.0%C. 13.6% D. 11.8% E. 14.1%9. Which of the following determine(s) the level of realinterest rates? I) The supply of savings by households and businessfirms.II) The demand for investment funds.III) The government's net supply and/or demand forfunds.A. I only.B. II only.C. I and II only. D. I, II, and III. E. III only.10. Which of the following statement(s) is (are) true?I) The real rate of interest is determined by the supply anddemand for funds.II) The real rate of interest is determined by the expectedrate of inflation.III) The real rate of interest can be affected by actions ofthe Fed.IV) The real rate of interest is equal to the nominal interestrate plus the expected rate of inflation. A. I and II only.B. I and III only.C. III and IV only.D. II and III only.E. I, II, III, and IV only.11. Which of the following statements is true?A. Inflation has no effect on the nominal rate ofinterest.B. The realized nominal rate of interest is always greaterthan the real rate of interest.Page | 3C. Certificates of deposit offer a guaranteed real rate ofinterest.D. Certificates of deposit offer a guaranteed nominal rate ofinterest.E. Inflation has no effect on the nominal rate of interest,the realized nominal rate of interest is always greater than thereal rate of interest, and certificates of deposit offer aguaranteed real rate of interest.12. Other things equal, an increase in the government budgetdeficit A. drives the interest rate down.B. drives the interest rate up.C. might not have any effect on interest rates.D. always increases business prospects. E. never increasesbusiness prospects.13. Ceteris paribus, a decrease in the demand for loanablefunds A. drives the interest rate down.B. drives the interest rate up.C. might not have any effect on interest rates.D. results from an increase in business prospects and adecrease in the level of savings. E. results from an increase inbusiness prospects and a increase in the level of savings.