A bond yielded a real rate of return of 3.87 percent for a time period when the inflation rate was 3.75 percent.What was the actual nominal rate of return?

Question

Quizplus · Accepted Answer

The nominal rate of return can be calculated using the formula: (1 + nominal rate) = (1 + real rate) * (1 + inflation rate). Plugging in the values: (1 + nominal rate) = (1 + 0.0387) * (1 + 0.0375) = 1.0777. Therefore, the nominal rate is approximately 7.77 percent.

A Bond Yielded a Real Rate of Return of 3