Real rates of return are typically less than nominal rates of return due to:
A) inflation.
B) capital gains.
C) dividend payments.
D) depreciation.

Question

Quizplus · Accepted Answer

Inflation erodes the purchasing power of money, and as a result, the real rate of return is typically lower than the nominal rate of return. For example, if an investment has a nominal rate of return of 10%, but the inflation rate is 3%, then the real rate of return is only 7%.

Real Rates of Return Are Typically Less Than Nominal Rates