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