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An average inflation rate which is expected over life of security...

This question belongs to Commerce Financial Management
Financial Management
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An average inflation rate which is expected over life of security is classified as

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Correct Answer: Option A
An average inflation rate which is expected over life of security is classified as inflation premium. An inflation premium is the part of prevailing interest rates that results from lenders compensating for expected inflation by pushing nominal interest rates to higher levels. Key points : Investors seek this premium to compensate for the erosion in the value of their capital due to inflation.
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