; A portfolio manager promises she can earn you an average annual nominal return of 9.2%...

 

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; A portfolio manager promises she can earn you an average annual nominal return of 9.2% if you open a $100,000 brokerage account and keep it open for the next five years. You are attracted by this prospect but based on inflation forecasts you are confident that the average annual rate of inflation will be 6.3% per year during this period. Given her promised annual nominal return and the 5-year average inflation rate of 6.3%, what do you expect will be the average annual real rate of return on your $100,000 brokerage account? ; A portfolio manager promises she can earn you an average annual nominal return of 9.2% if you open a $100,000 brokerage account and keep it open for the next five years. You are attracted by this prospect but based on inflation forecasts you are confident that the average annual rate of inflation will be 6.3% per year during this period. Given her promised annual nominal return and the 5-year average inflation rate of 6.3%, what do you expect will be the average annual real rate of return on your $100,000 brokerage account?

Answer rating: 100% (QA)

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