Question

A stock had a return of 15.2 percent last year. If the inflation rate was 1.8 percent, what was the approximate real return?

Answer 1

The real return of a stock is calculated by subtracting the inflation rate from the nominal return. In this case, the approximate real return is 13.4 percent after adjusting the initial 15.2 percent return by a 1.8 percent inflation rate.

Step-by-step explanation:

To calculate the real return of a stock, you need to adjust the return of the stock for the inflation rate. The real return is found by subtracting the inflation rate from the nominal return. In this case, the stock had a return of 15.2 percent last year, and the inflation rate was 1.8 percent.

To find the real return:

Start with the nominal return: 15.2%

Subtract the inflation rate: 1.8%

The real return = 15.2% - 1.8% = 13.4%

Therefore, the approximate real return on the stock, after accounting for inflation, was 13.4 percent.