Question

*Please show how to do the problem in excel with references showing* You purchased shares of...

*Please show how to do the problem in excel with references showing*

You purchased shares of a stock one year ago at a price of $64.79 per share. During the year you received dividend payments of $2.21 and sold the stock for $71.91 per share.

If the inflation rate during that year was 2.95%, what was your real rate of return?

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Answer #1

Below are Excel calculations. But just for the sake of it providing the formulas.

Return on share = (Sale Price - Buy Price + Dividend)/Buy Price

This return is nominal return.

Based on Fischer relation,

(1 + Nominal rate) = (1 + Real rate) * (1 + Inflation)

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