When making investment decisions, investors
a. compare the real interest rates offered on different bonds.
b. compare the nominal, but not the real, interest rates offered on different bonds.
c. purchase the highest-priced bond available.
d. all of the above are correct.

The answer is a. that is, we have to compare real interest rates offered on various bonds being offered.

Explanation:

As making investment decisions, investors should take into account the implicit costs of lending they incur once they lend the fund to the bond issuer instead of only paying intention to nominal interest rate denoted in a bond. One of the major implicit cost is the cost arisen from the weakening of money's purchasing power over time - that is, inflation cost.

In other words, real interest rate, that is, the interest rate that already takes into account the effect of inflation ( the percentage of money's value losses over time), should be used for investment decisions rather than the nominal rate stipulated in each bond.

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