If I have a 10 year investment with a 5% rate of return and a $1000...
If I have a 10 year investment with a 5% rate of return and a $1000 initial investment, what will happen if my inflation rate is bigger than my rate of return?
. I will have less money than I invested after controlling for inflation
B. I will have more money than I invested after controlling for inflation
C. It depends on the tax rate
D. It depends on my annual investment
Homework Answers
Net profit after adjusting inflation = return profit amount - inflation amount
If inflation rate is bigger than rate of return then,
return profit amount < inflation amount
and Net profit after adjusting inflation < 0
Thus, Option A
I will have less money than I invested after controlling for inflation
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