NISM Certifications · NISM-Series-XV: Research Analyst · Economic Analysis
An economy's CPI was 150 last year and 159 this year. Nominal yield on a bond is 9.0%. Using the approximate Fisher relation (real rate = nominal rate minus inflation), what is the real yield?
The real yield is about 3%. CPI rising from 150 to 159 means inflation of 6 percent, and subtracting this from the 9 percent nominal yield leaves a real return of roughly 3 percent.
- A3.0%Correct
- B9.0%
- C6.0%
- D15.0%
Explanation
Inflation = (159-150)/150 = 6%. Real yield ≈ 9% - 6% = 3%. Using 9% ignores inflation, 6% mistakes inflation for the real rate, and 15% adds instead of subtracting.
Did you get it right without looking?
One question tells you little. A timed set on Economic Analysis shows your real accuracy, how long you take and where you lose marks.
More Economic Analysis questions
- An economy has a fiscal deficit of Rs 16 lakh crore. Its total receipts excluding borrowings are Rs 30 lakh crore, and interest payments are…
- If the Reserve Bank of India raises the repo rate, which of the following is the most likely immediate effect on the economy?
- Which statement best describes the Phillips curve relationship in short-run economic analysis?
- In macroeconomic analysis, which of the following is classified as a lagging economic indicator?
- In macroeconomic analysis, which of the following best describes a lagging indicator?
- A widening current account deficit, other factors unchanged, would generally exert which pressure on the domestic currency?