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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Investment Landscape

Asha earns a nominal return of 10% a year while inflation is 6%. Using the approximate method (nominal return minus inflation), her real return is closest to:

Her real return is about 4%. The approximate real return equals the nominal return minus inflation, so 10% less 6% gives 4%. This shows the actual increase in purchasing power after price rises are accounted for.

  1. A16%
  2. B4%Correct
  3. C6%
  4. D60%

Explanation

Real return is approximately nominal return less inflation: 10% - 6% = 4%. Adding them gives 16%, which is the wrong sign. Using 6% just repeats the inflation rate.

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