The nominal rate of return minus the inflation rate is called the
A)stated rate of return.
B)standard rate of return.
C)real rate of return.
D)Fisher effect.
E)none of the above.

Question

Quizplus · Accepted Answer

The nominal rate of return is the stated rate of return. However, if we adjust it for inflation, we get the real rate of return. Therefore, the nominal rate of return minus inflation is the real rate of return. It is important to consider the real rate of return because it indicates the true increase in an investor's purchasing power, as it takes into account the effects of inflation. The Fisher effect, on the other hand, refers to the relationship between nominal interest rates, real interest rates, and inflation.

The Nominal Rate of Return Minus the Inflation Rate Is