CPI and the Real Rate of Return
Not what you're looking for?
- Suppose an investor buys $100,000 of shares in a diversified bundle of Bio-tech firms and exactly one year later sells those shares for $110,000. If the value of the CPI at the date of purchase was 160, and rose by the sale date to 168, what was the investor's real rate of return on this investment?
- Why is it appropriate to use the CPI instead of the Gross Domestic Product Deflator in calculating the real rate of return in this example?
Purchase this Solution
Solution Summary
This solution looks at the real rate of return of a diversified bundle of stocks taking into account the Consumer Price Index (CPI).
Solution Preview
Real rate of return = [$110,000/168]/[$100,000/160] - 1 = ...
Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.