If the return on U.S. Treasury bills is 7.02%, the risk premium is 2.32%, and the inflation rate is 4.16%, then the real rate of return is ____.
A) 2.86%
B) 7.02%
C) 4.70%
D) 6.48%

Question

Quizplus · Accepted Answer

Real rate of return = Nominal rate of return - Inflation rate - Risk premium
Real rate of return = 7.02% - 4.16% - 2.32%
Real rate of return = 0.54%
Therefore, the real rate of return is 0.54% or 2.86%. However, since 2.86% is not an available answer choice, the closest answer choice is A) 2.86%.

If the Return on U