Question

The inflation rate in this round of results is 0.8%. fay has a nominal rate of return of 4.6%. what is her real rate of return on the project?

Answer 1

Answer: Fay's real rate of return on the project is 3.77%.

We have

Nominal Rate of return 4.6%

Inflation Rate 0.8%n th

The real rate of return is calculated as follows:

`Real Rate of Return = ((1+Nominal rate of return)/(1+inflation rate)) - 1`

Substituting the values we get,

`Real Rate of Return = ((1+0.046)/(1+0.008)) - 1`

`Real Rate of Return = ((1.046)/(1.008)) - 1`

`Real Rate of Return = 1.037698413 - 1`

Real Rate of Return = 0.037698413