Last year, you purchased a stock at a price of $58.00 a share. Over the course of the year, you received $2.60 per share in dividends and inflation averaged 3.1 percent. Today, you sold your shares for $61.40 a share. What is your approximate real rate of return on this investment?
13.4%
7.2%
10.3%
9.0%
2.8%
Nominal rate of return = (Selling price + Dividend - Purchase price)/Purchase price
Nominal rate of return = (61.4 + 2.6 - 58)/58
Nominal rate of return = 10.34%
Real rate of return = Nominal rate of return - Inflation rate
Real rate of return = 10.34%-3.1%
Real rate of return = 7.2%
Correct option is > 7.2%
Last year, you purchased a stock at a price of $58.00 a share. Over the course...
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