Question

Assume the real rate of return is 2.97% and the inflation rate is 2.20%. Find the nominal rate of return using the exact formula.

Answer 1

Answer:

Nominal rate of return= 0.0517 = 5.17%

Explanation:

Giving the following information:

Real rate of return= 2.97%

Inflation rate= 2.20%

To calculate the nominal rate of return, we need to use the following formula:

Real rate of return= nominal rate of return - inflation rate

Nominal rate of return= Real rate of return +  inflation rate

Nominal rate of return= 0.0297 + 0.022

Nominal rate of return= 0.0517 = 5.17%