Which of the following statement(s) is(are) true?1) The real rate of interest is determined by the supply and demand for funds.II) The real rate of interest is determined by the expected rate of inflation.III) The real rate of interest is unaffected by actions of the Fed.IV) The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation.III and IV only.I only.OII and III only.O, II, III, and IV only.OI and III only. Consider the following probability distribution for stocks A and B:State Probability Return on Stock A Return on Stock B10.1010%8%27%36%9%8%13.2%; 9%The expected rates of return of stocks A and B are and14%; 10%O7.7%; 13.2%0.200.200.300.2013.2%; 7.7%13%12%14%15%respectively.

It is a problem that discusses the real interest rate and the factors that affect interest rates.

Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10% 8% 2 13% 7% 12% 6% 14% 9⁰ 15% 8% 5 0.20 0.20 0.30 0.20 The expected rates of return of stocks A and B are______ and respectively.

Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10% 8% 2 13% 7% 12% 6% 14% 9⁰ 15% 8% 5 0.20 0.20 0.30 0.20 The expected rates of return of stocks A and B are______ and respectively.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Which of the following statement(s) is(are) true?
1) The real rate of interest is determined by the supply and demand for funds.
II) The real rate of interest is determined by the expected rate of inflation.
III) The real rate of interest is unaffected by actions of the Fed.
IV) The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation.
III and IV only.
I only.
OII and III only.
O, II, III, and IV only.
OI and III only.

Consider the following probability distribution for stocks A and B:
State Probability Return on Stock A Return on Stock B
1
0.10
10%
8%
2
7%
3
6%
9%
8%
13.2%; 9%
The expected rates of return of stocks A and B are and
14%; 10%
O7.7%; 13.2%
0.20
0.20
0.30
0.20
13.2%; 7.7%
13%
12%
14%
15%
respectively.

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