Assuming a $1,000 face value, what was your total dollar return on this investme

Question

Assuming a $1,000 face value, what was your total dollar return on this investment over the past year?

$_______________________________________

What was your total nominal rate of return on this investment over the past year?

_____________________________%

If the inflation rate last year was 3 percent, what was your total real rate of return on this investment? (Do not round intermediate calculations.)

__________________________________%

Explanation / Answer

Assuming a $1,000 face value, what was your total dollar return on this investment over the past year?

Return = I+(P1-P0)

           = 150+(1115-1050)

            = 215

What was your total nominal rate of return on this investment over the past year?

Return = I+(P1-P0)/(P0

           = 150+(1115-1050)/1050

            = 215/1050

            = 0.2048

           = 20.48%    

If the inflation rate last year was 3 percent, what was your total real rate of return on this investment?

(1+R) = (1+r)+(1+i)

        R = (1.2048*1.03)-1

       R = 0.2409

        R = 24.09%

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