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During a 3-months period, the price index increases from 120.8 to 124.0. During the same period,...

During a 3-months period, the price index increases from 120.8 to 124.0. During the same period, a stock increases in price for $100 to $120.5. What is the real rate of return for the stock for the 3 month period? Express your answer as a percentage, for example, 3.18% should be entered as 3.18 without the percentage sign.

The answer is 17 but I do not know how to calculate it.

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Answer #1

Increase price = 120.5

Price after eliminating inflation factor = 120.5*120.8/124

= 117.39

Real rate of return = (117.39-100)/100

= 17.39%

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