# Math

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Real Reverse Nominal Returns

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

2 for each 40 is five percent. If inflation is 4 percent, then one percent is the real return. So 40 cents a share is the real return

I agree with BobP. Are you sure the multiple choices are in dollars and not cents? Could be a misprint.

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