By the ________, we mean the rate that would prevail in the economy if the average prices for goods and services were expected to remain constant during the loan's life.

Question

Quizplus · Accepted Answer

The phrase "if the average prices for goods and services were expected to remain constant" indicates that we are referring to the real rate of interest, which adjusts for inflation. The risk-free rate refers to the rate of return on a risk-free investment such as a government bond, while short and long term refer to the time period of the loan.

By the ________, We Mean the Rate That Would Prevail