If an investor had a $25,000 long-term capital gain on a $100,000 investment from 1984 to...
If an investor had a $25,000 long-term capital gain on a $100,000 investment from 1984 to 2010, her real rate of return was most likely
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Homework Answers
Answer
Option b
It is negative as inflation is higher than the nominal rate in this period in the world
nominal return is
i=(FV/PV)^(1/n)
n=years =2010-1984=26
i=(125000/100000)^(1/26)-1
=0.00861938
=0.86%
the normal inflation is above 2% in this time so it is negative
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