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How is the ex-port real rate of return calculated?
Suggested Answer: D
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The ex-post real rate of return is a backward-looking measure calculated after the fact, using historical data. It reflects the actual nominal rate of return adjusted for the actual rate of inflation over the same period. The formula is:
Ex-postrealreturn=NominalreturnInflationratetext{Ex-post real return} = text{Nominal return} - text{Inflation rate}Ex-postrealreturn=NominalreturnInflationrate
This measure helps assess the purchasing power of returns after accounting for inflation.
Other options are incorrect:
A and C describe ex-ante measures (forward-looking expectations).
B calculates the nominal excess return above the risk-free rate, not the real return.
17 comments · newest first
LO
Lorriane
22 days ago
Exactly! D reflects actual returns after inflation.
GE
Gertude
28 days ago
C is ex-ante, not ex-post. D is more accurate.
AM
Amira
1 month ago
I’m confused. Why not C? It’s about nominal rates too.
BE
Becky
1 month ago
D is definitely the best choice. Inflation impacts real value.
IN
Ines
1 month ago
But B doesn’t account for inflation like D does.
AV
Avery
2 months ago
I’m leaning towards B. Risk-free rate is important too.
VA
Vallie
2 months ago
I agree, D makes sense. Real returns matter.
MA
Maricela
2 months ago
I think it's D. Adjusting for inflation is key.
NI
Niesha
2 months ago
Just to clarify, ex-post means after the fact!
LA
Lai
2 months ago
Wait, are we sure about D? Sounds too simple.
OR
Oren
2 months ago
I thought it was B at first, but D seems more accurate.
FL
Flo
3 months ago
Totally agree with D! Makes the most sense.
LE
Lettie
3 months ago
It's D, right? Ex-post minus inflation.
MA
Maryanne
3 months ago
I vaguely recall that the ex-post real rate is about what you actually earned after inflation, so I lean towards D, but I need to double-check that.
DE
Denny
3 months ago
I feel like I might be mixing up ex-ante and ex-post terms. Wasn't there something about using the risk-free rate in one of the practice questions?
AL
Alline
3 months ago
I remember practicing a question like this, and I think the correct answer is D, since it makes sense to subtract inflation from the nominal return.
AL
Alyssa
4 months ago
I think the ex-post real rate of return is calculated by adjusting the nominal return for inflation, but I'm not sure if it's option D or C.