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An Investor Anticipates That Inflation Will Be 4 Per Cent

Question 32

Multiple Choice

An investor anticipates that inflation will be 4 per cent over the next year, and expects a return of 3 per cent for the pure time value of money. What risk premium will compensate the investor?


A) 1%
B) 12%
C) 7.1%
D) 7%

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