Suppose that for the coming year the force of inflation is forecast to be 4% and...

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Suppose that for the coming year the force of inflation is forecast to be 4% and the force of interest is forecast to be 10%.

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Answer 1

Answer #1

Real rate of return is = [(1+Nominal rate of return)/(1+Inflation rate)]-1
Real rate of return is = [(1+0.10)/(1+0.04)]-1
Real rate of return is = [1.057692]-1
Real rate of return is = 0.057692
Real rate of return is = 5.7692%
Real rate of return is = 5.769%

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Answer 2

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