Real Versus Nominal Returns.

The Costaguanan stock market provided a rate of return of 95 percent. The inflation rate in Costaguana during the year was 80 percent. In the United States, in contrast, the stock market return was only 12 percent, but the inflation rate was only 2 percent.
Which country's stock market provided the higher real rate of return?

Costaguanan nominal =251%

USA nominal =14.24%

To determine which country's stock market provided the higher real rate of return, we need to calculate the real return for both Costaguana and the United States.

Real return is calculated by subtracting the inflation rate from the nominal return.

For Costaguana:
Nominal Return = 95%
Inflation Rate = 80%

Real Return = Nominal Return - Inflation Rate
Real Return = 95% - 80%
Real Return = 15%

For the United States:
Nominal Return = 12%
Inflation Rate = 2%

Real Return = Nominal Return - Inflation Rate
Real Return = 12% - 2%
Real Return = 10%

Comparing the real returns, we find that Costaguana's stock market provided a higher real rate of return with 15%, while the United States had a real return of 10%.