Nominal return and the expected inflation rate

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Reference no: EM132020326

1. If investors require a 6.5% nominal return and the expected inflation rate is 3.5%, what is the expected real return?

a. 2.21%

b. 2.90%

c. 3.00%

d. 3.04%

e. 2.42%

2. A firm earns net income of $125,000 in a given year and the firm's retained earnings increase $50,000 for that same year. The retention ratio is:

a. 100%

b. 80%

c. 40%

d. 60%

e. 25%

Reference no: EM132020326

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