Your investments increased in value by 12.3 percent last year but your purchasing power increased by...
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Your investments increased in value by 12.3 percent last year but your purchasing power increased by only 8.3 percent. What was the approximate inflation rate? (Enter your answer as a percent rounded to 1 decimal place. Omit the "%" sign in your response.) |
| Inflation rate | % |
Homework Answers
Here,
Nominal Rate of Return = 12.30%
Real Rate of Return = 8.30%
(1 + Nominal Rate) = (1 + Real Rate)(1 + Inflation Rate)
(1 + 0.123) = (1 + 0.083)(1 + Inflation Rate)
Inflation Rate = (1.123/1.083) - 1
Inflation Rate = 3.7%
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