Problem 11-9 Real versus Nominal Returns (LO2)

The Costaguanan stock market provided a rate of return of 96%. The inflation rate in Costaguana during the year was 80%. In Ruritania, in contrast, the stock market return was only 16%, but the inflation rate was only 2%.

1. Calculate the real rate of return for both the Costaguana and the Ruritania stock markets.
2. Which countrys stock market provided the higher real rate of return?