Adequate information: The annual return on a long-term corporate bond is 6.4% and the long-term government bond is 6.0% from 1926 to 2017. The average inflation rate is 3.0%. To calculate: The historical real rate of return on long-term government bonds and corporate bonds. Introduction: Nominal rate of return refers to the rate of return that is earned by the investors before making any adjustments with respect to inflation. The real rate of return is the rate of return that is adjusted with the given inflation rate.

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Chapter 10, Problem 6QAP

Summary Introduction

Adequate information:

The annual return on a long-term corporate bond is 6.4% and the long-term government bond is 6.0% from 1926 to 2017.

The average inflation rate is 3.0%.

To calculate: The historical real rate of return on long-term government bonds and corporate bonds.

Introduction: Nominal rate of return refers to the rate of return that is earned by the investors before making any adjustments with respect to inflation. The real rate of return is the rate of return that is adjusted with the given inflation rate.

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