Asked by Adison Presley on May 13, 2024
Verified
An investor's portfolio increased in value by 53% over a five-year period while the Consumer Price Index rose from 121.6 to 135.3. What was the portfolio's annually compounded real rate of return?
Consumer Price Index
A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, often used as an indicator of inflation.
Real Rate Of Return
The annual percentage profit earned on an investment, adjusted for changes in the price level due to inflation.
Annually Compounded
Interest on an investment or loan calculated once per year, including interest on the initial amount and all previously accumulated interest.
- Calculate the real rate of return on an investment taking inflation into account.
Verified Answer
SB
Learning Objectives
- Calculate the real rate of return on an investment taking inflation into account.