If you invest your money at a 10% rate, and inflation is 3%, how much money did you really make? (As a percentage.)

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Chain

Mathematics

2 February, 06:02

If you invest your money at a 10% rate, and inflation is 3%, how much money did you really make? (As a percentage.)

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Golden · Answer 1

7%

Step-by-step explanation:

Suppose you invest $100 at 10% rate.

After a year, you should have 100 + 0.1 (100) = 100 + 10 = $110

But inflation is 3%, so you loose 0.03*100 = $3

Now your actual purchasing power is $110 - $3 = $107

With respect to $100, you gain $7, or 0.07 or 7%.

So, you would really make 7%