Jack Simmons is expecting to earn a 0.34% return on his investment in a government bond that matures next year. If the inflation rate during the time of maturity is expected to be 7%, what will be the real rate of return from his investment?
A) 6.64%
B) - 3.36%
C) - 6.22%
D) 25%

Question

Quizplus · Accepted Answer

The real rate of return is calculated by subtracting the inflation rate from the nominal return. Here, 0.34% - 7% = -6.66%.

Jack Simmons Is Expecting to Earn a 0