Pat invested in her employer's stock program in 1981. The annual yield for her investment was 6.5%, but the inflation rate was 7.8%. What was the real growth rate of this investment?
A) −1.21%
B) −2.09%
C) −3.30%
D) −4.41%

Question

Quizplus · Accepted Answer

The real growth rate can be calculated using the formula: Real Growth Rate = ((1 + nominal rate) / (1 + inflation rate)) - 1. Substituting the given values: ((1 + 0.065) / (1 + 0.078)) - 1 = (1.065 / 1.078) - 1 ≈ -0.0121 or -1.21%.

Pat Invested in Her Employer's Stock Program in 1981