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Sabbir Hossain
on Oct 19, 2024

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To obtain an approximate estimate of the real interest rate, one must ________ the ________ the nominal risk-free rate.

A) add; default premium to
B) subtract; default premium from
C) add; expected inflation to
D) subtract; expected inflation from

Real Interest Rate

The rate of interest an investor expects to receive after allowing for inflation, providing a more accurate measure of investment value.

Nominal Risk-Free Rate

The rate of return on an investment without inflation taken into account, representing only the absolute interest amount.

Expected Inflation

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling, as anticipated by consumers, businesses, and policymakers.

  • Familiarize oneself with the linkage between interest rates, expenditures by individuals, and entrepreneurial investments.
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Morgan OwensOct 24, 2024
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