Question

In order to compute an investor's real rate of return on a common stock holding, all of the following are necessary EXCEPT:

A)inflation rate.
B)dividends.
C)appreciation.
D)marginal tax bracket.

Answer 1

An investor's real rate of return on a common stock includes inflation rate, dividends, and capital gains but does not require the marginal tax bracket, which pertains to after-tax return calculations.

Step-by-step explanation:

To compute an investor's real rate of return on a common stock holding, an investor needs to consider the inflation rate, dividends received, and the appreciation (or capital gain) of the stock value. However, the investor's marginal tax bracket is not necessary for calculating the real rate of return. The marginal tax bracket is relevant when determining the after-tax rate of return but not the real rate of return, which reflects the purchasing power of the investment gains after accounting for inflation.