Real rate of return is equal to__________.

Nominal Rate x Inflation Rate

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Nominal Rate

\div

Inflation Rate

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Nominal Rate - Inflation Rate

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Nominal Rate + Inflation Rate

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Solution

The correct option is C Nominal Rate $\div$ Inflation Rate
The real rate of return formula is the sum of one plus the nominal rate divided by the sum of one plus the inflation rate which then is subtracted by one. The formula for the real rate of return can be used to determine the effective return on an investment after adjusting for inflation.

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Similar questions

How is rate of inflation calculated ?

What comprises of interest rate, the rate of inflation, the value of GDP, per capita income, tax rates, disposable income etc.

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