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3 years ago

What's your real rate of return if your savings account pays 2.5% interest and inflation is at 1%?

Mathematics

1 answer:

kolbaska11 [484]3 years ago

6 0

Answer:

Real rate of return = 1.5%

Step-by-step explanation:

Given:

Savings account return = 2.5%

Inflation rate = 1%

Find:

Real rate of return = ?

Computation:

⇒ Nominal rate of return = Real rate of return + Inflation rate

⇒ Real rate of return = Savings account return - Inflation rate

⇒ Real rate of return = 2.5% - 1%

⇒ Real rate of return = 1.5%

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Step-by-step explanation:

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We solve for both to determine the positive one:

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$x =\dfrac{-12+ \sqrt{2304}}{8}$ $x =\dfrac{-12- \sqrt{2304}}{8}$

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So if you are looking for a positive solution, just take the positive one as x.

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