George bought an investment one year ago and just calculated his return on investment. He found that his purchasing power has increased by 15% as a result of his investment. If inflation over the period was 4%, his _________________.

Question

Quizplus · Accepted Answer

The nominal return on investment includes both the real return and the inflation rate. Since George's purchasing power increased by 15%, this is the real return after accounting for inflation. Therefore, the nominal return must be more than 15% to also cover the 4% inflation.

George Bought an Investment One Year Ago and Just Calculated