A year ago, you invested $1,000 in a savings account that pays an annual interest rate of 6%. What is your approximate annual real rate of return if the rate of inflation was 2% over the year?

Question

Quizplus · Accepted Answer

The real rate of return adjusts the nominal rate (6%) for the effect of inflation (2%), calculated as approximately nominal rate - inflation rate = 6% - 2% = 4%.

A Year Ago, You Invested $1,000 in a Savings Account