FNCE 4500 TEST WITH
CORRECT SOLUTION
inflation. - ANSWER The real interest rate is the nominal interest rate adjusted for
expected or actual.
a unemployment
b production
c income growth
d inflation
expected real interest rate - ANSWER The nominal interest rate adjusted for expected
inflation; also called ex-ante real interest rate.
a expected real interest rate
b realized real interest rate
c after-tax real interest rate
d yield curve
realized real interest rate - ANSWER The nominal interest rate adjusted for actual
inflation.
a expected real interest rate
b realized real interest rate
c after-tax real interest rate
d yield curve
5+2 7 percent - ANSWER If the ex-post real interest is 5 percent and actual inflation rate
is 2 percent, the nominal interest rate is?
a 7 percent
b 3 percent
c 2.5 percent
, d 2 percent
b. lenders gained in real terms at the expense of borrowers - ANSWER If the expected
inflation rate was 7 percent and the actual inflation was 3 percent, then
a) borrowers gained in real terms at the expenses of lenders
b) lenders gained in real terms at the expense of borrowers
c) borrowers and lenders were not affected
d) the government gained because it collected more in taxes
1 percent; -1 percent - ANSWER if the expected inflation was 4 percent, the expected
real interest rate was 3 percent, and the realized real interest rate was 5 percent, then
the expected inflation rate was (blank) and the relized inflation was (blank).
a -1 percent; 1 percent
b -1 percent; 2 percent
c 1 percent; -1 percent
d 1 percent ;1 percent
$208
200*.04=8
8+200=208 - ANSWER The price of a certain amount of goods and services a year back
was $200. if price increased by 4 percent during the year, how much money is required
to buy the same amount of goods today?
a $208
b $204
c $400
d $404
Both the demand and supply curve for bonds shifts upward - ANSWER which of the
following happens when the expected inflation rate rises?
a) both the demand and supply bonds shift upwards
b) the demand curve for bonds shift to the left
c) the supply curve for bonds shift to the right
d) the expected real interest rate rises
CORRECT SOLUTION
inflation. - ANSWER The real interest rate is the nominal interest rate adjusted for
expected or actual.
a unemployment
b production
c income growth
d inflation
expected real interest rate - ANSWER The nominal interest rate adjusted for expected
inflation; also called ex-ante real interest rate.
a expected real interest rate
b realized real interest rate
c after-tax real interest rate
d yield curve
realized real interest rate - ANSWER The nominal interest rate adjusted for actual
inflation.
a expected real interest rate
b realized real interest rate
c after-tax real interest rate
d yield curve
5+2 7 percent - ANSWER If the ex-post real interest is 5 percent and actual inflation rate
is 2 percent, the nominal interest rate is?
a 7 percent
b 3 percent
c 2.5 percent
, d 2 percent
b. lenders gained in real terms at the expense of borrowers - ANSWER If the expected
inflation rate was 7 percent and the actual inflation was 3 percent, then
a) borrowers gained in real terms at the expenses of lenders
b) lenders gained in real terms at the expense of borrowers
c) borrowers and lenders were not affected
d) the government gained because it collected more in taxes
1 percent; -1 percent - ANSWER if the expected inflation was 4 percent, the expected
real interest rate was 3 percent, and the realized real interest rate was 5 percent, then
the expected inflation rate was (blank) and the relized inflation was (blank).
a -1 percent; 1 percent
b -1 percent; 2 percent
c 1 percent; -1 percent
d 1 percent ;1 percent
$208
200*.04=8
8+200=208 - ANSWER The price of a certain amount of goods and services a year back
was $200. if price increased by 4 percent during the year, how much money is required
to buy the same amount of goods today?
a $208
b $204
c $400
d $404
Both the demand and supply curve for bonds shifts upward - ANSWER which of the
following happens when the expected inflation rate rises?
a) both the demand and supply bonds shift upwards
b) the demand curve for bonds shift to the left
c) the supply curve for bonds shift to the right
d) the expected real interest rate rises
