If a Share of Stock Provided a 14

question 68

Multiple Choice

If a share of stock provided a 14.84% nominal rate of return over the previous year while the real rate of return was 6.65%,then the inflation rate was:

• A) 8.89%.
• B) 7.68%.
• C) 8.03%.
• D) 9.12%.

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Definitions:

Annual Rate of Inflation

the percent increase in the price level of goods and services across the economy over the course of a year.

Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, typically used to monitor inflation.

Compound Annual Real Rate of Return

The rate of return on an investment, adjusted for inflation, that compounds annually, reflecting the true purchasing power of earnings.

Annual Rate of Inflation

The percentage increase in the price of goods and services over a one-year period, indicating the rate at which the purchasing power of money is eroded.