USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that during the past year the consumer price index increased by 1.5 percent and the securities listed below returned the following nominal rates of return.

-Refer to Exhibit 1.5. What are the real rates of return for each of these securities?
A) 4.29% and 6.32%
B) 1.23% and 4.29%
C) 3.20% and 6.32%
D) 1.23% and 3.20%
E) 3.75% and 5.75%

Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that during the past year the consumer price index increased by 1.5 percent and the securities listed below returned the following nominal rates of return.
 
-Refer to Exhibit 1.5. What are the real rates of return for each of these securities?
A) 4.29% and 6.32% 
B) 1.23% and 4.29% 
C) 3.20% and 6.32% 
D) 1.23% and 3.20% 
E) 3.75% and 5.75%

Quizplus · Accepted Answer

The real rate of return is calculated by adjusting the nominal rate of return for inflation. Without specific nominal rates and inflation rates from Exhibit 1.5, the correct answer is based on the provided options.