price index was 128 in year 1, and the inflation rate was 24 percent between year 1 and year 2. the price index in year 2 was a.
1 answer:
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Answer:
The summary as per the given query is summarized in the explanation section below..
Explanation:
The given values are:
The nominal rate of return,
= 7%
i.e.,
= 0.07
Inflation,
= 4%
i.e.,
= 0.04
- Lengthy-term inflation would lessen the return on investment that lowers the net return as long-term investments are made.
- It can also aim to obtain a higher return that will comfortably exceed the rate of inflation and therefore is beneficial towards diminishing the average return.
Now,
The rate of return will be:
=
On substituting the values, we get
=
=
=
=
Therefore it isn't able to measure the average return rate because the quantity of years for its expenditure.