To which of the following is the real rate equal?
A)1 + inflation rate)/1 + investment rate)- 1)x 100
B)1 + investment rate)/1 + inflation rate)- 1)x 100
C)1 - investment rate)/1 - inflation rate)+ 1)x 100
D)1 - inflation rate)/1 - investment rate)+ 1)x 100
E)None of the above

Question

Quizplus · Accepted Answer

The real rate of return adjusts the nominal rate (investment rate) for the effect of inflation, allowing an investor to determine how much their investment's purchasing power has grown. The correct formula to calculate the real rate of return is: (1 + nominal rate) / (1 + inflation rate) - 1, which matches choice B.

To Which of the Following Is the Real Rate Equal