Question

An investment had a nominal return of 9.7 percent last year. The inflation rate was 2.7 percent. What was the real return on the investment

Answer 1

Answer:

6.816%

Explanation:

The real rate of return is nominal rate of return less inflation rate

(1 + nominal rate ) = (1 + real rate ) x (1 + inflation rate)

= 1.097 = real rate x 1.027 = 1.06816 - 1 = 0.06816 = 6.816%

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