Bonnie invested in her employer's stock program in 1981. The annual yield for her investment was 7.5%, but the inflation rate was 9.8%. What was the real growth rate of this investment?
A) −1.82%
B) −2.09%
C) −2.30%
D) −3.41%

Question

Quizplus · Accepted Answer

The real growth rate can be calculated using the formula: Real Growth Rate = ((1 + nominal rate) / (1 + inflation rate)) - 1. Plugging in the given values: ((1 + 0.075) / (1 + 0.098)) - 1 = (1.075 / 1.098) - 1 ≈ -0.0209 or -2.09%.

Bonnie Invested in Her Employer's Stock Program in 1981