Which Formula Computes the Actual Real Rate of Return on an Investment

question 25

Multiple Choice

Which formula computes the actual real rate of return on an investment?

• A)r = (1 + R )- (1 + h)
• B)r = (1 + R )/ (1 + h)
• C)r = (1 + R )- (1 + h)- 1
• D)r = (1 + R )/ (1 + h)- 1
• E)R = (1 + r)× (1 + h)- 1

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Definitions:

Maximin Strategy

A decision-making rule used in situations with uncertainty to maximize the minimum gain that can be achieved.

Prisoners' Dilemma

A scenario in game theory where two individuals act in their own self-interest but would have been better off cooperating.

Collusive Outcome

A situation in which firms in a market or industry agree to set prices or output levels cooperatively, often leading to higher prices for consumers.

Maximin Strategy

A decision rule used in situations of uncertainty to maximize the minimum gain that can be secured.