Neco Model Questions Vol1 2023 Economics Question 19

Practice objective / multiple choice question 19 from the 2023 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2023 Economics Objective / Multiple Choice Medium Difficulty
Question 19 NECO_MODEL_QUESTIONS_VOL1 • 2023 • ECONOMICS • objective

A bank offers a nominal interest rate of \(12\%\) per annum compounded annually. Expected inflation for the next year is \(8\%\). Another investment guarantees a real interest rate of \(3\%\) per annum. Which option provides the higher nominal return, and what is the real return of the bank's offer?

Answer Options

A. Bank deposit gives higher nominal return; its real return ≈ 4.5%
Correct Answer B. Bank deposit gives higher nominal return; its real return ≈ 3.7%
C. The other investment gives higher nominal return; its real return ≈ 3%
D. Bank deposit gives higher nominal return; its real return ≈ 2.0%
Correct Answer
B
Correct Option:
Bank deposit gives higher nominal return; its real return ≈ 3.7%

About This Question

This is Neco Model Questions Vol1 2023 Economics Question 19. It is one of the objective questions from the 2023 Neco Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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