If a bond offers an investor 11% in nominal return during a year in which the rate of inflation is 4%,then the investor's real return is:
A) 6.73%.
B) 6.31%.
C) 15.44%.
D) 10.56%.

Name: If a bond offers an investor 11% in nominal return during a year in which the rate of inflation is 4%,then the investor's real return is: A) 6.73%. B) 6.31%. C) 15.44%. D) 10.56%.
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Question

Quizplus · Accepted Answer

1 + real return = 1.11 / 1.04 − 1 = 0.0673, or 6.73%

If a Bond Offers an Investor 11% in Nominal Return