2. Assume Putlee invested in a commodity index when its price was $2500 in 2022 and sold it for $2720 in 2023. Over the same period, the consumer price index changed from 125 to 130. Calculate: a) Putlee's nominal rate of return on the investment b) Inflation rate during the period c) Putlee's real rate of return on the investment.
2. Assume Putlee invested in a commodity index when its price was $2500 in 2022 and sold it for $2720 in 2023. Over the same period, the consumer price index changed from 125 to 130. Calculate: a) Putlee's nominal rate of return on the investment b) Inflation rate during the period c) Putlee's real rate of return on the investment.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:2. Assume Putlee invested in a commodity index when its price was $2500 in 2022 and sold it for
$2720 in 2023. Over the same period, the consumer price index changed from 125 to 130.
Calculate
a) Putlee's nominal rate of return on the investment
b) Inflation rate during the period
c) Putlee's real rate of return on the investment.
Expert Solution
Step 1: Determine the variables in the question:
Variables in the question:
Investment price in commodity index in 2022=$2500
Sale price of commodity index in 2023=$2720
Consumer price index in 2022=125
Consumer price index in 2023=130
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