A year ago, you invested $12,000 in an investment that produced a return of 16%. What is your approximate annual real rate of return if the rate of inflation was 4% over the year?

A) 18%
B) 2%
C) 12%
D) 15%

Question

Reymundo Gutierrez · Accepted Answer

Final Answer : C, Explanation :  The real rate of return adjusts the nominal return (16%) for the effect of inflation (4%). Using the approximation formula for real return = nominal return - inflation rate, we get 16% - 4% = 12%.

A year ago, you invested $12,000 in an investment that produced a return of 16%. What is your approximate annual real rate of return if the rate of inflation was 4% over the year?

A) 18%
B) 2%
C) 12%
D) 15%

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Learning Objectives

Related questions

A year ago, you invested $12,000 in an investment that produced a return of 16%. What is your approximate annual real rate of return if the rate of inflation was 4% over the year?A) 18%B) 2%C) 12%D) 15%

Definitions

Learning Objectives

Learning Objectives

Related questions

A year ago, you invested $12,000 in an investment that produced a return of 16%. What is your approximate annual real rate of return if the rate of inflation was 4% over the year?

A) 18%
B) 2%
C) 12%
D) 15%