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

Ravi invested Rs 2,00,000 in an asset that was worth Rs 2,30,000 after one year, with no income received during the year. If inflation during the year was 5%, what is the approximate real rate of return using the simple subtraction method?

The approximate real return is 10%. The nominal return is Rs 30,000 on Rs 2,00,000, which is 15%, and subtracting the 5% inflation rate leaves a real return of about 10% under the simple subtraction method.

  1. A20%
  2. B15%
  3. C10%Correct
  4. D5%

Explanation

Nominal return = 30,000/2,00,000 = 15%. Approximate real return = nominal minus inflation = 15% - 5% = 10%. Option 15% ignores inflation, and 20% wrongly adds inflation.

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