If a bond offers an investor 11 percent in nominal return during a year in which the rate of inflation was 4 percent, then the investor's real return was:

Name: If a bond offers an investor 11 percent in nominal return during a year in which the rate of inflation was 4 percent, then the investor's real return was:
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Question

Quizplus · Accepted Answer

The real return can be calculated using the formula: (1 + nominal return) / (1 + inflation rate) - 1. Plugging in the values: (1.11 / 1.04) - 1 = 0.0673 or 6.73 percent.

If a Bond Offers an Investor 11 Percent in Nominal