Question 15 Assume that the inflation rate during the last year was 1.49 percent

Question

Question 15

Assume that the inflation rate during the last year was 1.49 percent. US government T-bills had the nominal rates of return of 5.30 percent. What is the real rate of return for a T-bill?

Round the answer to two decimal places in percentage form

Answer:

but I keep getting 3.81 using

=5.3%-1.49%

Large-cap stocks had the nominal rates of return of 14.96 percent. The rate of inflation during the last year was 3.38 percent. What is the real rate of return for large-cap stocks?

Round the answer to two decimal places in percentage form

Answer

but I keep getting 11.58 using =14.96%-3.38%

Can I please get the right formula to get the right answer. Preferably in excel format formula

Question 15

Explanation / Answer

Formula used for Inflation Adjusted Return is

Inflation adjusted return = {(1+Normal Return)/(1+inflation adjusted return)}-1

1. Real rate of return = ((1+.0530)/(1+.0149))-1 = 0.037541 = 3.75%

2. Real rate of return = ((1+.1496)/(1+.0338))-1 = 0.112014 = 11.20%

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.