A year ago, you invested $10,000 in a savings account that pays an annual interest rate of 3%. What is your approximate annual real rate of return if the rate of inflation was 4% over the year?
A) 1%
B) −1%
C) 7%
D) 3%

Question

Quizplus · Accepted Answer

The real rate of return adjusts the nominal rate (3%) for the effects of inflation (4%), calculated as approximately nominal rate - inflation rate = 3% - 4% = -1%.

A Year Ago, You Invested $10,000 in a Savings Account