Problem:
A bond that pays interest annually yields a rate of return of 7.75 percent. The inflation rate for the same period is 4 percent.
Required:
Question: What is the real rate of return on this bond?
- 1.94 percent
- 4.00 percent
- 3.61 percent
- 11.75 percent
- 1.04 percent
Note: Provide support for your rationale.