Excpected rate of inflation
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You are given the following long-run annual rates of return for alternative investments:
U.S. Gov't T-bills 3.75%
Large-cap common stock 12.45%
Long-term corporate bonds 6.15%
Long-term Gov't bonds 5.15%
Small-capitalization common stock 14.20%
The annual rate of inflation is 3.5%. What is the real rate of return (hint: use formula on page 17)
The annual rate of inflation is 3.5% what is the rate of return
Hint : USE FORMULA
NRFE=(1+RRFR)X(1+EXPECTED RATE OF INFLATION)-1
RRFR=(1+NRFR OF RETURN)/(1+NRFR OF RETURN)-1
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Solution Summary
The expected rate of return for alternative investments are examined.
Education
- MBA, Indian Institute of Finance
- Bsc, Madras University
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