Question

The ____ on an investment

doesn't consider the effect of inflation on purchasing power.
If the inflation rate is positive, the real the return will be the _____ nominal return on an investment

First option
A. Nominal return
B.real return

Second option
A.equal to
B.greater than
C.less than

Answer 1

First blank is NOMINAL return.

Second is LESS THAN.

Explanation:

Real return is what is earned on an investment after accounting for taxes and inflation. Real returns are lower than nominal returns, which do not subtract taxes and inflation.

So first blank is NOMINAL return.

Second is LESS THAN.

A quick example - - - if I have a 20% nominal return on investment and inflation is 5%, then my real return is approx 15% (so it's less than nominal).