Appears in our practice questions for: SIE, Series 65
An investment return measured before adjusting for inflation, contrasted with real return, which reflects changes in purchasing power. It matters because it can change the risk, tax, cost, ownership, or legal result.
Practice questions using Nominal Return
Original questions written against the published FINRA and NASAA exam content outlines — not actual exam questions. Every choice is explained.
Celeste Diaz earns a nominal 8.40% on a $133,357 portfolio while inflation is 3.90%. Using the exact multiplicative relationship, what is the real return?
A.12.30%This adds inflation to nominal return, which moves in the wrong direction.
B.4.50%This uses the common subtraction approximation rather than the exact calculation requested.
C.4.33%This uses the exact relationship between nominal growth and inflation.
D.46.43%This forms a ratio of the two percentages rather than adjusting growth factors.
Why: The exact real return divides the growth factor of the nominal return by the inflation growth factor and subtracts one. Simple subtraction is an approximation and can differ from the exact answer.
Laila Alvarez earns a nominal 7.80% on a $175,339 portfolio while inflation is 2.70%. Using the exact multiplicative relationship, what is the real return?
A.5.10%This uses the common subtraction approximation rather than the exact calculation requested.
B.10.50%This adds inflation to nominal return, which moves in the wrong direction.
C.4.97%This uses the exact relationship between nominal growth and inflation.
D.34.62%This forms a ratio of the two percentages rather than adjusting growth factors.
Why: The exact real return divides the growth factor of the nominal return by the inflation growth factor and subtracts one. Simple subtraction is an approximation and can differ from the exact answer.
Amara Usman earns a nominal 4.80% on a $60,199 portfolio while inflation is 5.10%. Using the exact multiplicative relationship, what is the real return?
A.-0.29%This uses the exact relationship between nominal growth and inflation.
B.106.25%This forms a ratio of the two percentages rather than adjusting growth factors.
C.9.90%This adds inflation to nominal return, which moves in the wrong direction.
D.-0.30%This uses the common subtraction approximation rather than the exact calculation requested.
Why: The exact real return divides the growth factor of the nominal return by the inflation growth factor and subtracts one. Simple subtraction is an approximation and can differ from the exact answer.
Talia Park earns a nominal 5.30% on a $67,239 portfolio while inflation is 2.90%. Using the exact multiplicative relationship, what is the real return?
A.54.72%This forms a ratio of the two percentages rather than adjusting growth factors.
B.2.33%This uses the exact relationship between nominal growth and inflation.
C.8.20%This adds inflation to nominal return, which moves in the wrong direction.
D.2.40%This uses the common subtraction approximation rather than the exact calculation requested.
Why: The exact real return divides the growth factor of the nominal return by the inflation growth factor and subtracts one. Simple subtraction is an approximation and can differ from the exact answer.
30 questions in our bank involve Nominal Return. Practise them with instant explanations.
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