RatedrillNominal return for a real target
A time value of money problem from Ratedrill. Solve it with one answer box, with fresh numbers on every attempt and the formula, calculator keystrokes and Excel version in the worked answer, and it is checked the moment you submit.
The task
You want your savings to grow by 1% a year in real terms, after inflation. If inflation runs at 2.25% a year, what nominal annual return do you need? Give the exact Fisher answer, not the shortcut.
What this problem teaches
The shortcut 1% + 2.25% = 3.25% misses the cross term real × inflation of 0.0225 percentage points.
A hint if you get stuck
Fisher: (1 + nominal) = (1 + real) × (1 + inflation).
Try it now, free, no account needed
The first 15 tasks on Ratedrill are free. Open it on the practice page, solve it, and get instant feedback with a hint. A free account adds the worked solution; Pro adds timed mode and the certificate.
Open this problemMore problems in Business math
- Break-even unitsPro
- Break-even revenuePro
- Price for a target marginPro
- Margin from a markupPro
- Cost of skipping a discountPro
- Straight-line book valuePro
- Double-declining depreciationPro
- Sum-of-the-years'-digitsPro
- Real return after inflationPro
- Weighted average cost of capitalPro
- After-tax cost of debtPro
- Future value in today's dollarsPro
- Lease vs buyPro