You own an asset that had a total return last year of 16 per

You own an asset that had a total return last year of 16 percent. If the inflation rate last year was 6 percent, what was your real return?

Solution

Real return=(1+nominal rate)/(1+inflation rate)-1

=(1+0.16)/(1+0.06)-1

=(1.16/1.06)-1

which is equal to

=9.43%(Approx).