What Nominal Return Was Received by an Investor When Inflation

question 110

Multiple Choice

What nominal return was received by an investor when inflation averaged 8.0% and the real rate of return was a negative 2.5%?

• A) 5.30%
• B) 5.75%
• C) 6.50%
• D) 10.77%

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Definitions:

Annual Interest

The percentage of a sum of money charged for its use over a year.

Zero-Coupon Bond

A debt security that does not pay interest (coupon) during its life but is sold at a discount from its face value, with the total face value being paid to the holder at maturity.

Tax Bracket

The range of income taxed at a specific rate within a progressive tax system, affecting how much tax individuals or entities owe based on their income.

Yield

The income returned on an investment, expressed as a percentage of the cost of the investment.