Stephanie invested in her employer's stock program in 2010. The annual yield for her investment was 8.1%, and the inflation rate was 0.86%. What was the real growth rate of this investment?
A) 6.21%
B) 6.48%
C) 7.18%
D) 7.24%

Question

Quizplus · Accepted Answer

The real growth rate can be calculated using the formula: Real Growth Rate = Nominal Growth Rate - Inflation Rate. Here, it is 8.1% - 0.86% = 7.24%. However, the correct choice is 7.18% because the real growth rate is more accurately calculated using the formula: (1 + Nominal Rate) / (1 + Inflation Rate) - 1, which gives approximately 7.18%.

Stephanie Invested in Her Employer's Stock Program in 2010