Last year, Rita earned 11.6 percent on her investments while U.S. Treasury bills yielded 3.8 percent and the inflation rate was 3.1 percent. What real rate of return did she earn on her investments last year?

Question

Quizplus · Accepted Answer

Real rate of return = (1 + nominal rate) / (1 + inflation rate) - 1
Real rate of return = (1 + 0.116) / (1 + 0.031) - 1
Real rate of return = 0.0824 or 8.24% (rounded to two decimal places)

Last Year, Rita Earned 11