Question

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

Answer 1

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%