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April 20, 2014

Homework Help: Real reverse Nominal Returns

Posted by Antoinette on Wednesday, March 21, 2007 at 2:12am.

You purchase 100 shares of stock for $40 a share. The stock pays a $2 per share dividend at year-end. What is the rate of return on your investment for these end-of-year stock prices? What is your real (inflation-adjusted) rated of return? Assume an inflation rate of 4 percent.
a. $38
b. $40
c. $42

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