The outstanding bonds of Winter Time Products provide a real rate of return of 3.03 percent. The current rate of inflation is 4.68 percent. What is the actual nominal rate of return on these bonds

The correct answer is 7.85%.

Explanation:

According to the scenario, the given data are as follows:

Rate of return (r) = 3.03%

Rate of inflation (i) = 4.68%

So, we can calculate the nominal rate of return by using following method:

Nominal rate of return = (1 + r) (1 + i) - 1

By putting the value we get

Nominal rate of return = (1 + 0.0303) (1 + 0.0468) - 1

= 0.0785 or 7.85%