What Nominal Annual Return Is Required on an Investment in Order

question 36

Multiple Choice

What nominal annual return is required on an investment in order that an investor experiences a 12 percent gain in purchasing power? Assume inflation to be 4 percent.

• A)7.69 percent
• B)9.29 percent
• C)12.00 percent
• D)16.48 percent (1 + real rate) x (1 + inflation rate) = 1 + nominal rate

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Definitions:

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