Question

How does inflation affect investments? A.) It reduces the monetary value of the rate of return. B.) It creates a negative market psychology and decreases asset prices. C.) It makes investments less liquid. D.) It increases the market price of investments.

Answer 1

A) It reduces the monetary value of the rate of return

The reason being the money decreases value and isn't worth the same as it used to

Answer 2

The answer is: It reduces the monetary value of the rate of return

Inflation would make the value of a certain currency become weakened when being exchanged with currency of other country. Meaning that for foreign investors, when they receive the a certain amount of dividend from their investment, the monetary value from that dividend would be reduced since they can buy less amount of resources from it.