3
QuizMultiple Choice

Inflation, Interest Rates, and Investment Decisions — Quiz

Question 3 • Personal Finance

Part A: Which investment provides the best real return?

Answer
A
3% return, 6% inflation
B
5% return, 4% inflation
C
4% return, 4% inflation
D
8% return, 3% inflation

Explanation

Real return is approximately the investment return minus the inflation rate. A has a real return of −3%, B is 1%, C is 0%, and D is 5%. Therefore, the 8% return with 3% inflation provides the best real return.

AI-written and checked against the verified answer.

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