If investors require a 7% nominal return and the expected inflation rate is 3%, what is the expected real return?

Name: If investors require a 7% nominal return and the expected inflation rate is 3%, what is the expected real return?
Brand: Quizplus
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Quizplus · Accepted Answer

The expected real return can be calculated using the Fisher equation: (1 + nominal rate) = (1 + real rate) * (1 + inflation rate). Solving for the real rate gives: (1 + 0.07) / (1 + 0.03) - 1 = 0.0388 or 3.88%.

If Investors Require a 7% Nominal Return and the Expected