The correct answer is: C. Nominal Rate – Inflation Rate
The real rate of return is the rate of return on an investment after adjusting for inflation. It is calculated by subtracting the inflation rate from the nominal rate of return.
The nominal rate of return is the stated rate of interest on an investment. It does not take into account inflation.
The inflation rate is the rate at which prices for goods and services are rising. It is measured as a percentage.
For example, if you invest \$100 at a nominal rate of 5% and the inflation rate is 3%, your real rate of return would be 2%. This is because after one year, your investment would be worth \$105. But because prices have risen by 3%, your purchasing power would have only increased by 2%.
It is important to calculate the real rate of return on an investment because it can help you to make informed decisions about where to invest your money. If you are looking for an investment that will keep up with inflation, you will need to choose an investment with a real rate of return that is greater than the inflation rate.