You presently own stock that you purchased one year ago. Your return on the stock for the past year was 25%. You calculate your real return on investment was 13.63%. The rate of inﬂation must
Have been __________.

Question

Quizplus · Accepted Answer

The real return is calculated using the formula: Real Return = (1 + Nominal Return) / (1 + Inflation Rate) - 1. Solving for the inflation rate with a nominal return of 25% and a real return of 13.63%, the inflation rate is approximately 10%.

You Presently Own Stock That You Purchased One Year Ago