Question

Suppose you earned nominal return of 10 percent on your investment last year. If the inflation rate last year was 2.9 percent, what was your real rate of return on this investment? (Enter your answers as a decimal rounded to 4 decimal places, not a percentage. For example, enter 0.0843 instead of 8.43%)

Answer 1

Real rate of return will be 1.82 %

Step-by-step explanation:

We have given nominal rate of return = 10%

Inflation rate of return = 2.9 %

We have to find the real rate of return on this investment

Real rate of return is given by

Real rate of return
`=(1+nominal\ rate)/(1+inflation\ rate)-1=(1+10)/(1+2.9)-1=1.82` %

So real rate of return will be 1.82 %