An investment had a nominal return of 11.7 percent last year. The inflation rate was 4.4 percent. What was the real return on the investment? o. \( 11.58 \% \) b. \( 7.77 \% \) c. \( 6.54 \% \) d. \( 6.99 \% \) e. \( 16.61 \% \)

To find the real return on the investment, you can use the formula: \[ \text{Real Return} = \frac{1 + \text{Nominal Return}}{1 + \text{Inflation Rate}} - 1 \] Plugging in the values: \[ \text{Real Return} = \frac{1 + 0.117}{1 + 0.044} - 1 \approx 0.0702 \text{ or } 7.02\% \] So the answer closest to the real return is d. \( 6.99 \% \). Calculating the real return is essential for investors as it provides a clearer picture of how much their investments are genuinely growing after accounting for inflation. Understanding this helps in making more informed decisions! Also, it's interesting to note that many investors overlook the effects of inflation, focusing solely on nominal returns. This can lead to the illusion of making money when, in fact, purchasing power isn't increasing as much as they think. It's all about keeping an eye on the inflation trend!