Answer:
7%
Explanation:
nominal interest rate = real interest rate + expected inflation rate
nominal interest rate = 5% + 2% = 7%
Usually the nominal interest rate has four major components:
- real interest rate: the net interest rate received by a lender or an investor
- inflation rate: the general rise in the prices of goods and services, as inflation increases, the purchasing power of a currency decreases
- liquidity risk premium: usually collateralized loans include a liquidity risk premium since not all assets can be easily converted to cash.
- credit risk: possibility of the borrower defaulting the loan
Answer:
Hedge funds are: high risk, even though they may be market-neutral.
Answer:
C) linked to the production and sale of some other item.
Explanation:
• Derived demand is an economic term describing the demand for a good/service resulting from the demand for an intermediate or related good/service.
• Derived demand is solely related to the demand placed on a good or service for its ability to acquire or produce another good or service.
• The principles behind derived demand work in both directions; if the demand for a good decrease, the demand for the goods required to produce the item will also decrease.
