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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Introduction to Investment

Which of the following best describes 'real return' on an investment?

Real return is the nominal return adjusted for inflation. It shows the actual increase in purchasing power of an investment, rather than just the rupee growth, so it is the figure that tells an investor whether wealth truly grew.

  1. AReturn earned after adjusting nominal return for inflationCorrect
  2. BReturn earned before deducting any fees
  3. CReturn earned only from dividend or interest income
  4. DReturn earned in a foreign currency

Explanation

Real return measures the gain in purchasing power, i.e. nominal return adjusted for inflation. The other options describe gross return, income return and currency return, which do not capture inflation.

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