If you require a real growth in the purchasing power of your investment of 8%,and you expect the rate of inflation over the next year to be 3%,what is the lowest nominal return that you would be satisfied with?
A) 3.00%
B) 8.00%
C) 11.00%
D) 11.24%

Question

Quizplus · Accepted Answer

To calculate the required nominal return, we need to add the expected inflation rate to the real return required. So, required nominal return = required real return + expected inflation rate = 8% + 3% = 11%. Therefore, the lowest nominal return that the investor would be satisfied with is 11%. Choice D is the only option that meets this requirement.

If You Require a Real Growth in the Purchasing Power