Say you own an asset that had a total return last year of 10.8 percent. If the i

Question

Say you own an asset that had a total return last year of 10.8 percent. If the inflation rate last year was 5.1 percent, what was your real return? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Say you own an asset that had a total return last year of 10.8 percent. If the inflation rate last year was 5.1 percent, what was your real return? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

Hi,

Please find the answer as follows:

(1+R) = (1+r)*(1+h)

where R indicates total return and h indicates inflation rate. r indicates real return.

r = (1 +.108)/(1+.051) - 1 = 5.42%

Answer is 5.42%.

Thanks.

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