Which one of the following rates represents the change, if any, in your purchasing power as a result of owning a bond?

Question

Quizplus · Accepted Answer

The real rate represents the change in purchasing power as it takes into account the inflation rate. Owning a bond may provide a nominal rate of return, but if inflation is higher, the real rate of return may be negative, resulting in a decrease in purchasing power. The risk-free rate and realized rate may not necessarily reflect changes in purchasing power, and the current rate may refer to different rates depending on the context.

Which One of the Following Rates Represents the Change, If