If you earn a real rate of return of 2% and inflation is 4%, what is...

Question

Question

If you earn a real rate of return of 2% and inflation is 4%, what is your nominal rate of return? (to 2 decimal places)

Answer 1

Answer #1

(1+ nominal rate) = (1 + real rate)*(1+inflation rate)

(1+ nominal rate) = (1 + 0.02)*(1+0.04) = 1.0608

(1 + nominal rate) = 1.0608

nominal rate = 1.0608-1 =0.0608 = 6.08%

Answer : 6.08% (THUMBS UP PLEASE)

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Answer 2

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