An inflation rate includes in bond's interest rates is one which is inflation rate________?
Correct answer: B. Expected in future
- A. At bond issuance
- B. Expected in future
- C. Expected at time of maturity
- D. Expected at deferred call
Explanation
The inflation component included in a bond’s interest rate reflects inflation expected in the future over the investment period. Inflation already observed at issuance does not correctly represent the required compensation for future purchasing-power loss.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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