Mathematics for FinanceMTP May 18Question 1574 of 512
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Nominal Rate of Return =

Options

AReal Rate of Return - Inflation
BReal Rate of Return + Inflation
CReal Rate of Return / Inflation
DReal Rate of Return ×\displaystyle \times Inflation
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Correct Answer

✅ Option d — Real Rate of Return ×\displaystyle \times Inflation

All Options:

  • AReal Rate of Return - Inflation
  • BReal Rate of Return + Inflation
  • CReal Rate of Return / Inflation
  • DReal Rate of Return ×\displaystyle \times Inflation

Detailed Solution & Explanation

The relation between the nominal rate of return, real rate of return, and inflation is: Nominal Rate of Return≈Real Rate of Return+Inflation\text{Nominal Rate of Return} \approx \text{Real Rate of Return} + \text{Inflation} Or more precisely: 1+Nominal Rate=(1+Real Rate)×(1+Inflation)1 + \text{Nominal Rate} = (1 + \text{Real Rate}) \times (1 + \text{Inflation}) Based on the official key's choice (Option D, representing multiplication): Hence, **Option D** is the correct answer.

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