Mathematics of FinanceMCQMTP 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 dReal 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

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Detailed Solution & Explanation

The relation between the nominal rate of return, real rate of return, and inflation is: Nominal Rate of ReturnReal 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.

About This Chapter: Mathematics of Finance

Paper

Paper 3: Quantitative Aptitude

Weightage

12-16 Marks

Key Topics

Simple & Compound Interest, Annuity, Perpetuity

The most important mathematical chapter in the entire syllabus. It covers Simple Interest (SI), Compound Interest (CI), Nominal vs Effective rates, Present and Future Value, Annuities (Ordinary and Due), Sinking Funds, and Perpetuities. The concepts learned here are applied heavily in CA Intermediate and Final.

View Official ICAI Syllabus

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