We Can Approximate the Real Return on an Investment by Subtracting

Multiple Choice

We can approximate the real return on an investment by subtracting the inflation rate from the nominal return on the investment. For example, an investment that returns 10% per year while inflation is 4% per year has a real (inflation adjusted) return of approximately 6%. Which of the following outcomes is NOT possible?

A) Nominal and real returns are positive
B) Nominal return is positive, real return is negative
C) Nominal return is negative, real return is positive
D) all of these outcomes are possible