Table 12.2
Returns on Investment

-Referring to Table 12.2, if the nominal interest rate is 8.5 percent and there is no inflation, which investments will be undertaken?
A) E
B) D, E
C) C, E
D) none of the above

Question

Table 12.2
Returns on Investment
 
-Referring to Table 12.2, if the nominal interest rate is 8.5 percent and there is no inflation, which investments will be undertaken?
A) E 
B) D, E 
C) C, E 
D) none of the above

Quizplus · Accepted Answer

If there is no inflation, the real interest rate is the same as the nominal interest rate, 8.5%. Investment E will be undertaken if its return is greater than or equal to 8.5%.

Table 12.2 Returns on Investment