APFIVE Nominal And Real Interest Rates
All of the following statements regarding the impact of nominal and real interest rates on investment decisions are true except:
A
When nominal interest rates are lower than the rate of inflation, the resulting real interest rate is negative.
B
A positive real interest rate indicates that investors are increasing their purchasing power over time.
C
Inflation erodes the purchasing power of interest earnings, making it important to consider the real interest rate.
D
Investors generally ignore inflation and base their decisions solely on nominal interest rates.
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