1. If investors require a 6.5% nominal return and the expected inflation rate is 3.5%, what is the expected real return?
a. 2.21%
b. 2.90%
c. 3.00%
d. 3.04%
e. 2.42%
2. A firm earns net income of $125,000 in a given year and the firm's retained earnings increase $50,000 for that same year. The retention ratio is:
a. 100%
b. 80%
c. 40%
d. 60%
e. 25%