If the real rate is 16% and an inflation rate is 8%, then the nominal rate of return will be __________?
Correct answer: B. 25.28%
- A. 27.28%
- B. 25.28%
- C. 22.28
- D. 21.28
Explanation
The nominal rate combines the real rate and inflation: (1.16 × 1.08) − 1 = 25.28%. Adding the rates directly would ignore the inflation effect on the real return.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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