Say you own an asset that had a total return last year of 11.7 percent. If the i
ID: 2749117 • Letter: S
Question
Say you own an asset that had a total return last year of 11.7 percent. If the inflation rate last year was 6.9 percent, what was your real return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Say you own an asset that had a total return last year of 11.7 percent. If the inflation rate last year was 6.9 percent, what was your real return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Explanation / Answer
(1 + inflation) ( 1 + real return) = (1 + total return)
(1 + 6.9%)( 1 + real return) = (1 + 11.7%)
(1 + real return) = (1 + 11.7%) / (1 + 6.9%) = 1.0449
Real Return = 1.0449 - 1 = 0.0449 = 4.49%