Economics & AnalysisQuestion 98 of 100
The real rate of return is best described as:
a.The nominal return before any adjustment
b.The return guaranteed by the government
c.The nominal return adjusted for inflation
d.The dividend yield only
Explanation
The real rate of return is the nominal return reduced by the inflation rate, reflecting the true increase in purchasing power. It matters because inflation erodes the value of investment gains. Advisers use it to set realistic long-term expectations.
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