Question

An investment offers a total return of 13 percent over the coming year. Alan Wingspan thinks the total real return on this investment will be only 9 percent.

What does Alan believe the inflation rate will be over the next year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Inflation rate              %

Answer 1

Real return = ((1+nominal return)/(1+inflation rate)-1)*100

0.09=((1+0.13)/(1+inflation rate)-1)*100

inflation rate% = 3.67