Question

If an investment yields 6% at the same time as inflation as measured by the CPI increases by 6%, the inflation-adjusted rate of return is:

Answer 1

Answer: 0%

Step-by-step explanation:

The inflation-adjusted rate of return removes the effects of inflation from a return to find out the real return that an investment made.

Simple formula is;

= Nominal return - Inflation rate

= 6% - 6%

= 0%

The real rate of return is 0% meaning that if inflation is taken into account, the investment did not yield anything.