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EMI, CAGR & Depreciation · Question 31 of 66

Question 31

EasyOriginal question

A deposit earns a nominal return of 12% a year while prices rise by 5% a year. Roughly what is the real rate of return?

Options for question 31

Show the answer and explanation
CorrectNot quiteAnswer C

Correct answer: C

Explanation

  1. The real return is roughly the nominal return minus inflation.

  2. 12%−5%=7%12\% - 5\% = 7\%.

Worth noting

17% adds inflation instead of taking it off.

Concept
Nominal and real return
Typical time
60 s
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The rule this testsRate of return and CAGR
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