If the nominal rate of return on investment is 6% and inflation is 2% over a holding period, what is the real rate of return on this investment?
A. 3.92%
B. 4%
C. 4.12%
D. 6%
Answer: A. 3.92%
1 + r = (1 + R)/(1 + i) - 1
1 + r = 1.06/1.02 - 1 = .0392
If the nominal rate of return on investment is 6% and inflation is 2% over a holding period, what is the real rate of return on this investment?
A. 3.92%
B. 4%
C. 4.12%
D. 6%
Answer: A. 3.92%
1 + r = (1 + R)/(1 + i) - 1
1 + r = 1.06/1.02 - 1 = .0392