Consider the Following Statements About the Accounting for Inflation in a Capital

Multiple Choice

Consider the following statements about the accounting for inflation in a capital budgeting analysis:
I. An analyst can use nominal dollars in conjunction with a nominal interest rate.
II. An analyst can use real dollars in conjunction with a real interest rate.
III. An analyst can use nominal dollars in conjunction with a real interest rate.
Which of the above statements is (are) correct?

A) I only.
B) II only.
C) III only.
D) I and II.
E) II and III.