In: Finance
Say you own an asset that had a total return last year of 14
percent. If the inflation rate last year was 5.5 percent, what was
your real return? |
Multiple Choice
7.96%
8.16%
8.26%
-7.46%
8.06%
(1 + Nominal rate of return) = (1 + Real rate of return)(1 + Inflation rate)
(1 + 0.14) = (1 + Real rate of return)(1 + 0.055)
Real rate of return = [(1 + 0.14) / (1 + 0.055)] - 1
Real rate of return = 0.0806 or 8.06%