The real rate of return on a stock is approximately equal to the nominal rate of return:
A) Multiplied by (1 + inﬂation rate).
B) Plus the inﬂation rate.
C) Minus the inﬂation rate.
D) Divided by (1 + inﬂation rate).
E) Divided by (1 - inﬂation rate).

Question

Quizplus · Accepted Answer

The real rate of return on a stock is the nominal rate of return minus the inflation rate. This is because inflation reduces the purchasing power of the return, so the real return is what is left after accounting for inflation.

The Real Rate of Return on a Stock Is Approximately