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Yuliya22 [10]
2 years ago
15

A bond that pays interest annually yielded 7.37 percent last year. The inflation rate for the same period was 2.4 percent. What

was the actual real rate of return?
Business
1 answer:
bazaltina [42]2 years ago
5 0

Answer:

Real interest rate= 0.0497= 4.97%

Explanation:

Giving the following information:

A bond that pays interest annually yielded 7.37 percent last year. The inflation rate for the same period was 2.4 percent.

<u>The effect of the inflation rate is counterproductive to the interest rate. It diminishes purchasing power.</u>

Real interest rate= nominal interest rate - inflation rate

Real interest rate= 0.0737 - 0.024

Real interest rate= 0.0497= 4.97%

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