Gce Model Questions Vol1 2025 Economics Question 29
Practice objective / multiple choice question 29 from the 2025 Gce Model Questions Vol1 Economics examination.
An investor can choose between two 5‑year options. Option A is a bond paying a nominal annual interest rate of 12 % payable once a year. Option B is a savings account offering a nominal rate of 10 % compounded semi‑annually. Expected inflation is 6 % in year 1 and is projected to rise by 0.5 % each subsequent year. Using the Fisher relation, which option provides the higher real return over the 5‑year horizon, and what is the approximate average annual real return for that option (to one decimal place)?
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About This Question
This is Gce Model Questions Vol1 2025 Economics Question 29. It is one of the objective questions from the 2025 Gce Model Questions Vol1 Economics examination.
Difficulty level: Medium .
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