Question

If you bought a stock of CCC for 140 AUD and sold it for 200 AUD in a year. If consumer price index rose from 124 to 140 during the same period, what was your real return?

Answer 1

1 + nominal interest rate = (1+ real interest rate)*(1+ inflation)
Find the nominal rate of return for the CCC stock				(200 AUD - 140AUD)/140AUD
Nominal rate of return = .4286
Find the inflation using the consumer price index				(140 - 124)/124
Inflation = .1290
1+.4286 = (1+ real interest rate)*(1+.1290)
1+ real interest rate = (1.4286)/(1.1290)
1+ real interest rate = 1.2654
real interest rate = .2654
Your real rate of return is 26.54%.