Jagdeep Is Considering a Project That Requires a Large Immediate

question 4

Multiple Choice

Jagdeep is considering a project that requires a large immediate investment and yields a return in five years. If he assumes that there will be be no inflation over the next five years, his calculated rate of return on the project is 25%. If he instead assumes a 10% annual rate of inflation, what will his expected real rate of return be?

• A)It will still be 25%.
• B)13.64%
• C)15%
• D)35%
• E)37.5%

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