1. The Fisher Effect has all of the following components, except:
A) Real Rate on the Investment, r
B) Compensation for Inflation of Original Investment, h
C) Expected Rate of Return, E
D) Compensation for Inflation on Investment Earned
2. You are considering the purchase of a 15-year $1,000 face value bond that pays interest of $90 annually. If you required a return of 10%, how much should you be willing to pay for this bond?
A. $1,124.65
B.$1,000.00
C. $923.94
D. $873.15
E. $1,080.60