Suppose prices increase by 4% per year. What nominal percentage return on your savings account would you require to get a 1% real return?

Name: Suppose prices increase by 4% per year. What nominal percentage return on your savings account would you require to get a 1% real return?
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Question

Quizplus · Accepted Answer

To achieve a 1% real return when prices increase by 4%, you need a nominal return of 5% because the real return is approximately the nominal return minus the inflation rate (5% - 4% = 1%).

Suppose Prices Increase by 4% Per Year