The inflation rate over the past year was 4.2 percent. If an investment had a real...

The inflation rate over the past year was 4.2 percent. If an investment had a real return of 9.4 percent, what was the nominal return on the investment?

Expert Solution

Nominal rate of return = (1 + Real rate of return) * (1 + inflation rate) - 1
= (1 + 9.4%) * (1 + 4.2%) - 1
= 1.1399 - 1
= 0.1399 or 13.99%

Nominal rate of return = 13.99%

jeff jeffy answered 2 years ago

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