Help
Basics (Saving and Investing) Intermediate: Effects of Inflation on Investments

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Inflation occurs when the general price level falls from one period to the next.
Choose wisely. There is only one correct answer.
False. Inflation occurs when the general price level rises from one period to the next.
2.
What is the approximate real rate of return on a one-year bond that has a nominal rate of 6 percent while inflation was 2 percent during that year?
Choose wisely. There is only one correct answer.
3.92 percent.
3.
Hedging is the practice of reducing risk by investing in risk-free assets.
Choose wisely. There is only one correct answer.
False. Hedging is the practice of investing in assets that reduce the risk associated with other assets in your portfolio by responding to a particular stimulus in an opposite manner.
4.
One measure of inflation in the United States is the Consumer Price Index.
Choose wisely. There is only one correct answer.
True. The Consumer Price Index measures inflation.
5.
Evidence has shown that inflation and stocks have which relationship?
Choose wisely. There is only one correct answer.
Real returns on stocks tend to decrease when inflation increases. Remember that real returns are adjusted for inflation.
Introduction to Effects of Inflation on Investments What Is Inflation? The Effect of Inflation on Fixed-Income Investments The Effect of Inflation on Stocks Hedging against Inflation Summary of Effects of Inflation on Investments Find out what you learned