Question

if someone says that an investment had a rate of return of %10 why does it matter if the person means a nominal rate of return or a real rate of return? a.) nominal rates usually appear lower, b.) nominal rates are adjusted for inflation, c.) real rates take inflation into account, d.) real rates are official and cannot be made up.

Answer 1

The correct option is c.)

Explanation:

If someone says that an investment had a rate of return of 10% It matters if the person means a nominal rate of return or a real rate of return because real rates take inflation into account. Nominal rates are not adjusted for inflation. Nominal rates of return usually appear to be higher than the real rates of return.

Therefore the correct option is c.)