Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Jeremy Dixons portfolio earned 13.5% last year. Inflation for the year was 3.25%. Calculate his approximate real rate of return. What was the investor's actual
Jeremy Dixons portfolio earned 13.5% last year. Inflation for the year was 3.25%. Calculate his approximate real rate of return. What was the investor's actual real rate of return, using the Fisher equation?
I calculated the approximate real rate of return to be approximately 9.93%.
The Fisher Equation is: (1+R) = (1+r) * (1+h) where r is the % purchasing power has increased in the investment, and h = inflation over the period. If we are not given r, how do we figure out the actual real rate of return using the Fisher equation?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started