When making investment decisions, which of the following are investors most likely to do?
A) They compare the real interest rates offered on different bonds.
B) They compare the nominal, but not the real, interest rates offered on different bonds.
C) They purchase the highest-priced bond available.
D) They purchase the highest-interest bonds available.

Question

Quizplus · Accepted Answer

Investors are most likely to compare the real interest rates offered on different bonds. Real interest rates take inflation into account and provide a better measure of the true return on an investment. Comparing nominal interest rates can be misleading if inflation rates differ between bonds. Purchasing the highest-priced bond or highest-interest bond may not necessarily result in the highest returns, as these factors do not take inflation into account.

When Making Investment Decisions, Which of the Following Are Investors