Investments

Question 1 (8 Marks) Throughout the time of chronic inflation, a debt security (bond) offered a nominal rate of return 60% per year on your money. The inflation rate was 48% per year over the same period. a. What was the exact real rate of return on the debt security over the year? 3 marks b. What was approximate real rate of return over the year? Briefly explain the problem of using the approximation rule' to find the rate of return. 5 marks Show all your calculations