Question

What would happen to the buying power of your investment after one year if your rate of return was 8% and the rate of inflation was 3%?

-The buying power would decrease by 1%
-The buying power would increase by 11%
-The buying power would increase by 5%
-The buying power would increase by 8%

Answer 1

Rate of return = increase buying power

Inflation rate = decrease buying power

Based on that, the buying power would increase by 5 %

8% - 3 % = 5 %

Hope this helps