Question

Say you own an asset that had a total return last year of 11.7 percent. If the inflation rate last year was 6.9 percent, what was your real return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Real return %

Answer 1

Real rate of return= 0.048 = 4.8%

Step-by-step explanation:

Giving the following information:

Nominal rate of return= 11.7%

Inflation rate= 6.9%

To calculate the real rate of return, we need to use the following formula:

Real rate of return= nominal rate of return - inflation rate

Real rate of return= 0.117 - 0.069

Real rate of return= 0.048 = 4.8%

The inflation rate decreases the real value of money through time.