Question

You're considering an investment that you expect will produce a return of 77 percent next​ year, and you expect that your real rate of return on this investment will be 33 percent. what do you expect inflation to be next​ year?

Answer 1

This problem is simply straight forward. The total rate of return is simply the sum of the real rate of return and the inflation rate, that is:

77% = 33% + Inflation Rate

Therefore inflation is:

Inflation Rate = 77% - 33%

Inflation Rate = 44%