Question

Jair invested his money and earned 12% over the last year. Over the same duration, the inflation rate was 4%. What is his real rate of return.

Question 9 options:

4%


8%


12%


16%

Answer 1

Answer:

The real rate of return formula is the sum of one plus the nominal rate divided by the sum of one plus the inflation rate which then is subtracted by one. The formula for the real rate of return can be used to determine the effective return on an investment after adjusting for inflation.