Assume one investor bought a 10-year inflation-protected bond with a fixed annual real rate of 1.5 percent and another investor bought a 10-year bond without inflation protection with a nominal annual return of 4.2 percent. If inflation over the 10-year period averaged 2 percent, which investor earned a higher real return?
A. The investor who purchased the bond without inflation protection.
B. Neither investor earned a positive real return.
C. The investor who purchased the inflation protected bond.
D. Both investors earned the same real return.
Answer: A
You might also like to view...
The essence of the monetarists view on crowding out is that higher government spending which is not financed by new money creation simply
A) reduces private spending by an equal amount. B) decreases the demand for money. C) increases investment. D) increases aggregate demand in the in the long run.
Suppose Ernie gives up his job as financial advisor for P.E.T.S., at which he earned $30,000 per year, to open up a store selling spot remover to Dalmatians. He invested $10,000 in the store, which had been in savings earning 5 percent interest. This year's revenues in the new business were $50,000 . and explicit costs were $10,000 . Calculate Ernie's accounting profit
a. $10,000 b. $50,000 c. $20,000 d. $40,000 e. $9,500
The assumption that firms attempt to maximize profits will yield good predictions even if firms sometimes pursue other goals
a. True b. False Indicate whether the statement is true or false
In nations where the supply of real loanable funds is inelastic, the real risk-free interest rate is likely to:
a. To fluctuate more than the equilibrium quantity of loanable funds per period. b. Be very stable over time and not to react strongly on changes in demand. c. Be high compared to countries where the supply of real loanable funds is elastic. d. None of the above.