Question

An investment had a nominal return of 9.8 percent last year. If the real return on the investment was only 7.2 percent, what was the inflation rate for the year? 2.43%17.71%2.69%10.04%​​

Answer 1

The inflation rate is calculated by subtracting the real return (7.2%) from the nominal return (9.8%), giving an inflation rate of 2.6%. The closest offered answer is 2.69%.

Step-by-step explanation:

The question is asking us to calculate the inflation rate when the nominal return on an investment was 9.8% and the real return was 7.2%. The inflation rate can be found using the formula:

Nominal Return = Real Return + Inflation Rate

Rearranging this formula to solve for the inflation rate gives us:

Inflation Rate = Nominal Return - Real Return

Substituting the given numbers into this equation, we get:

Inflation Rate = 9.8% - 7.2% = 2.6%

Therefore, the inflation rate for the year was 2.6%. The closest answer to this calculated value is 2.69%.