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3 February, 04:41

You are an excellent investor and have averaged a 12% rate of return over the last 20 years. Over the same time period, inflation has averaged 3.2%. What is the real rate of return you have earned on your investments?

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  1. 3 February, 06:17
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    real rate of return = 8.8%

    Explanation:

    given data

    nominal rate of return = 12 %

    time = 20 year

    inflation rate = 3.2%

    solution

    we will apply here Nominal rate of return to get real rate of return that is

    nominal rate of return = Real rate of return + Inflation rate ... 1

    put here value and we will get real rate of return

    real rate of return = nominal rate of return - inflation rate

    real rate of return = 12% - 3.2%

    real rate of return = 8.8%
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