The Real Return from Investing $100 in a Stock for a Year

question 109

Short Answer

The real return from investing $100 in a stock for a year is computed to be 2%. If the nominal return from this investment is 3.5%, what is the expected inflation rate?

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Definitions:

Trading Floor

The physical location where traders buy and sell securities, such as stocks or futures, within a financial exchange setting.

Leaving Money on the Table

A term used in finance and economics indicating a situation where less profit is made from a deal than what could have been made.

Investment Bank

A financial institution that assists individuals, corporations, and governments in raising financial capital by underwriting or acting as the client's agent in the issuance of securities.

Stock Offering

The process by which a company issues its stocks to investors to raise capital, often referred to as equity financing.