Question

Last year, Rita earned 11.6 percent on her investments while U.S. Treasury bills yielded 3.8 percent and the inflation rate was 3.1 percent. What real rate of return did she earn on her investments last year?A. 7.51 percentB. 8.24 percentC. 8.56 percentD. 9.24 percentE. 10.39 percent

Answer 1

B. 8.24 percent

Step-by-step explanation:

Real rate of return = [1+Nominal/1+Inflation ate] - 1

Real rate of return = [1+0.116/1+0.031] - 1

Real rate of return = [1.116/1.031] - 1

Real rate of return = 1.08244 - 1

Real rate of return = 0.08244

Real rate of return = 8.24%