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pogonyaev
3 years ago
10

Assume the real rate of return is 3.37% and the inflation rate is 1.47%. Find the nominal rate of return using the exact formula

.
Business
1 answer:
Citrus2011 [14]3 years ago
7 0

Answer:

4.89%

Explanation:

Real rate of return = 3.37%

Inflation rate = 1.47%

The nominal rate of return is computed as shown below:

= [ (1 + real rate of return) x (1 + inflation rate) ] - 1

= [ (1 + 0.0337) x (1 + 0.0147) ] - 1

= (1.0337 * 1.0147) - 1

= 1.04889539 - 1

= 0.04889539

= 4.889539%

= 4.89% approx.

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