Respuesta :
A bond has a yield to maturity of 9.51 percent. If the inflation rate is 2.2 percent, The real rate of return on the bond is 84.3%
Real Rate = (1+Nominal Rate) / (1+Inflation rate) - 1
= (1+0.0902) / (1+0.032) - 1
= 1.843023256 - 1
= 0.843023256 or 84.3%
- The annual percentage of profit made on an investment, after accounting for inflation, is the real rate of return. Since this is the case, the real rate of return accurately depicts the true purchasing power of a given sum of money over time.
- The amount of a nominal return that is real return can be determined by the investor by adjusting the nominal return to account for inflation.
- Investors who want to calculate real returns on their money or choose from a variety of investment options must also take into account the impact of other factors, such as taxes and investing fees, in addition to accounting for inflation.
- Real rates of return are lower than nominal rates of return, with the exception of periods of deflation or zero inflation.
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