The main reason that savers must assess the impact of inflation on returns is
A)an increase in inflation will lower the nominal return on an asset.
B)changes in the value of money will affect the real value of returns.
C)inflation has a larger impact on the returns on luxury assets than on the returns on necessity assets.
D)real after-tax returns generally rise during periods of inflation.

Question

Quizplus · Accepted Answer

Inflation can erode the purchasing power of money over time, which affects the real value of returns earned on investments. Savers must assess the impact of inflation on returns to ensure that the nominal returns earned on an asset are able to at least keep pace with the rate of inflation, thus maintaining the real value of their returns.

The Main Reason That Savers Must Assess the Impact of Inflation