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 decreases the purchasing power of money over time, which means that the actual amount of goods and services that can be bought with a certain amount of money decreases. Therefore, the real rate of return is the nominal rate of return minus the rate of inflation, resulting in a lower real rate of return. The other options (B, C, D) are factors that can contribute to nominal rates of return, but they do not necessarily affect real rates of return.

Real Rates of Return Are Typically Less Than Nominal Rates