Waec Model Questions Vol1 2020 Economics Question 34

Practice objective / multiple choice question 34 from the 2020 Waec Model Questions Vol1 Economics examination.

Waec Model Questions Vol1 2020 Economics Objective / Multiple Choice Medium Difficulty
Question 34 WAEC_MODEL_QUESTIONS_VOL1 • 2020 • ECONOMICS • objective

A commercial bank advertises a nominal interest rate of 12 % per annum. An investor expects inflation to be 8 % for the coming year, but the actual inflation turns out to be 10 %. (i) Compute the expected real interest rate using the expected inflation rate. (ii) Compute the actual real interest rate using the actual inflation rate. (iii) By what percentage did the investor over‑estimate the real return?

Answer Options

A. Expected real = 3.5 %; Actual real = 1.5 %; Percentage error ≈ 133 %
B. Expected real = 3.0 %; Actual real = 2.5 %; Percentage error ≈ 20 %
Correct Answer C. Expected real = 3.7 %; Actual real = 1.8 %; Percentage error ≈ 104 %
D. Expected real = 4.0 %; Actual real = 2.0 %; Percentage error ≈ 100 %
Correct Answer
C
Correct Option:
Expected real = 3.7 %; Actual real = 1.8 %; Percentage error ≈ 104 %

About This Question

This is Waec Model Questions Vol1 2020 Economics Question 34. It is one of the objective questions from the 2020 Waec Model Questions Vol1 Economics examination.

Difficulty level: Medium .

View More Waec Model Questions Vol1 2020 Economics Questions More Waec Model Questions Vol1 Practice Questions Back to Questions

Master the Exam!

You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.

Unlock Full Access Available for Android & Windows
Chat with Support