If a bond offers an investor 11% in nominal return during a year in which the rate of inflation was 4%,then the investor's real return was:
A) 6.73%
B) 7.00%
C) 8.75%
D) 10.56%

Question

Quizplus · Accepted Answer

The real return can be calculated using the formula: Real Return = ((1 + Nominal Return) / (1 + Inflation Rate)) - 1. Plugging in the values: ((1 + 0.11) / (1 + 0.04)) - 1 = 0.0673 or 6.73%.

If a Bond Offers an Investor 11% in Nominal Return