A year ago,you invested $1,000 in a savings account that pays an annual interest rate of 7%.What is your approximate annual real rate of return if the rate of inflation was 3% over the year?
A)4%.
B)10%.
C)7%.
D)3%.
E)none of the above.

Question

Quizplus · Accepted Answer

To calculate the real rate of return, we need to subtract the inflation rate from the nominal rate of return. 
So, the real rate of return is approximately 4%:
Real rate of return = Nominal rate of return - Inflation rate
= 7% - 3%
= 4% 
Therefore, the best choice is option A) 4%.

A Year Ago,you Invested $1,000 in a Savings Account That