Real rates of return will be positive as long as:
A)The nominal return is positive
B)The inflation rate is positive
C)The nominal return exceeds the inflation rate
D)The inflation rate exceeds the real return

Question

Quizplus · Accepted Answer

Real rates of return are calculated by subtracting the inflation rate from the nominal rate of return. Thus, the real rate will be positive only when the nominal rate is higher than the inflation rate. Choice A is not sufficient because a positive nominal return could still result in a negative real return if the inflation rate is higher. Choice B is not sufficient because a positive inflation rate could still result in a negative real return if the nominal return is lower. Choice D is simply the opposite of the correct answer.

Real Rates of Return Will Be Positive as Long As