Nico bought an investment one year ago and just calculated his return on investment. He found that his purchasing power had increased by 15 percent as a result of his investment. If inflation during the year was 4 percent, then Nico's
A) real return on investment is more than 15 percent.
B) nominal return on investment is more than 15 percent.
C) nominal return on investment is less than 11 percent.
D) real return on investment is equal to 4 percent.

Question

Quizplus · Accepted Answer

Nico's purchasing power increased by 15%, which is the real return. To find the nominal return, we add the inflation rate to the real return: 15% + 4% = 19%. Thus, the nominal return is more than 15%.

Nico Bought an Investment One Year Ago and Just Calculated