Answer:
Nominal return = 3.80 %
Real return = -1.2 %
Explanation:
given data
bought = 100 shares
common stock - $105
dividend = $6 per share
sell 100 shares = $95
inflation rate = 5%
solution
we know Purchase cost will be here
Purchase cost = 100 × $105
Purchase cost = $10,500
so Total dividend received is
Total dividend received = 100 × $6
Total dividend received = $600
and
Total sales receipt is = 100 × $95
Total sales receipt = $9500
so
Total earnings from shares = $9500 + $600
Total earnings from shares = $10,100
Loss from shares is = Total earning from shares - Purchase cost
Loss from share = $10,500 - $10,100
Loss from share = $400
so
nominal return on investment is
Nominal return = × 100
Nominal return = × 100
Nominal return = 3.80 %
and
real return on your investment
Real return = Nominal return - Inflation rate
Real return = 3.80 - 5.00
Real return = -1.2 %