Question

Last year, you earned a rate of return of 11.29 percent on your bond investments. During that time, the inflation rate was 4.6 percent. What was your real rate of return?

Answer 1

Answer:

the real rate of interest of  6.39 %

Explanation:

given,

rate of return on your bond  = 11.29 %

the inflation rate  = 4.6 %

real rate of return = ?

rate of return = $(\dfrac{1+ return\ rate}{1 + inflation }-1)\times 100$

rate of return = $(\dfrac{1+ 0.1129 }{1 + 0.046 }-1)\times 100$

rate of return = $(\dfrac{1+ 0.1129 }{1 + 0.046 }-1)\times 100$

rate of return = $(\dfrac{1.1129}{1.046 }-1)\times 100$

                    = 6.39 %

the real rate of interest of  6.39 %