Nominal interest is defined as equal

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Reference no: EM132062719

1. Exactly five years from today, assume that your $160M DB plan must make a $30.0M payment. The payment is quoted in today’s dollars, thus you do not need to adjust for annual inflation of 2.0%. You do, however, need to account for an annual tax rate of 35.0%, which will be applied to any appreciation of YOY plan assets. In order to make the payment five years from now without falling below the original $160M in plan assets, the required real rate of before tax return is closest to:

A. 1.2%

B. 2.3%

C. 3.5%

D. 5.4%

E. 5.8%

2. Most people purchase insurance because they are _____.

risk-tolerant

risk-averse

risk-return

risk indifferent

3. Nominal interest is defined as equal to ______.

the real interest rate plus expected rate of inflation

the expected rate of inflation plus the discount rate

the forward rate plus the spot rate divided by Z

the Fisher rate minus the real interest rate

Reference no: EM132062719

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