An investment had a nominal return of 11.2 percent last year. The inflation rate was 3.4...

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Question

Answer 1

Answer #1

(1 + Real rate of return) = (1 + Nominal rate of return) / (1 + Inflation rate)

(1 + Real rate of return) = (1 + 0.112) / (1 + 0.034)

(1 + Real rate of return) = 1.112 / 1.034

1 + Real rate of return = 1.0754

or Real rate of Return = 0.0754

Real rate of Return = 7.54%

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Answer 2

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