7%
5%
5.70%
6.25%
Answer is Right!
Answer is Wrong!
The correct answer is A. 7%.
The real discount rate is the rate of return that an investor expects to earn after adjusting for inflation. It is calculated by subtracting the inflation rate from the money discount rate.
In this case, the money discount rate is 19% and the inflation rate is 12%. Therefore, the real discount rate is 19% – 12% = 7%.
Option B is incorrect because it is the money discount rate, not the real discount rate.
Option C is incorrect because it is the inflation rate, not the real discount rate.
Option D is incorrect because it is the average of the money discount rate and the inflation rate, not the real discount rate.