Question

Reijo has invested €8,000 in an investment fund with an average return of 6% per year. Reijo sells the fund shares after 6 years, and a 30% tax is normally paid on the capital gain. How many percent is the real return on Reijo's investment when the consumer price index has risen from 104.1 to 116.6 at the same time?

174

likes
868 views

Answer to a math question Reijo has invested €8,000 in an investment fund with an average return of 6% per year. Reijo sells the fund shares after 6 years, and a 30% tax is normally paid on the capital gain. How many percent is the real return on Reijo's investment when the consumer price index has risen from 104.1 to 116.6 at the same time?

Expert avatar
Hester
4.8
116 Answers
To calculate the real return on Reijo's investment, we need to adjust the nominal return with inflation using the Consumer Price Index (CPI).

1. Calculate the nominal return after 6 years:
Future value (FV) of investment = €8,000 * (1 + 0.06)^6
FV = €8,000 * (1.06)^6
FV = €8,000 * 1.418519
FV = €11,348.15

2. Calculate the capital gain:
Capital gain = FV - Initial investment
Capital gain = €11,348.15 - €8,000
Capital gain = €3,348.15

3. Calculate the tax on capital gain:
Tax on capital gain = 30% * Capital gain
Tax = 0.30 * €3,348.15
Tax = €1,004.45

4. Calculate the net capital gain:
Net capital gain = Capital gain - Tax
Net capital gain = €3,348.15 - €1,004.45
Net capital gain = €2,343.70

5. Calculate the real return after adjusting for inflation:
Real return = (Net capital gain / Initial investment) * (CPI at end / CPI at start)
Real return = (€2,343.70 / €8,000) * (116.6 / 104.1)
Real return = 0.2929625 * 1.119663
Real return = 0.3279667

Therefore, the real return on Reijo's investment with inflation adjustment is 32.80%.

\boxed{32.80\%}

Frequently asked questions (FAQs)
What is the value of hyperbolic cosine function at x = 2?
+
Find the integral of ∫(3x^2 + 4) dx.
+
What is the mathematical expression to find the area of a circle with radius r?
+
New questions in Mathematics
5(4x+3)=75
what is 9% of 307
Determine the correct value: A company knows that invoices pending collection have a normal distribution with a mean of $1.65 million, with a standard deviation of $0.2 million, then: The probability that an invoice pending collection has an amount that is within more than 2 deviations below the mean, is:
(5-(4-3)*3)-(8+5))
"If three wolves catch three rabbits in three hours, how many wolves would it take to catch a hundred rabbits in a hundred hours?" The answer is the number of response units.
How long will it take for $900 to become $5000 at an annual rate of 11.15% compounded bimonthly?
A pair of die is thrown and the absolute difference of the two scores is recorded. What is the probability of the absolute difference being 4 or more?
3. A rock is dropped from a height of 16 ft. It is determined that its height (in feet) above ground t seconds later (for 0≤t≤3) is given by s(t)=-2t2 + 16. Find the average velocity of the rock over [0.2,0.21] time interval.
X³-27
Buffalo Company makes and sells shampoo. Each unit requires $1.40 labor costs, material costs per unit are $0.90 and other variable costs are $0.30. It sells shampoo for $4.45 to retailers. Fixed costs are $15,000. It sold 25,000 units in the current month. What is the Break-Even point in units? What is the Break-Even point in dollars? What is the contribution margin of Buffalo Company?
Jasminder has made 55% of the recipes in a particular cookbook. If there are 9 recipes that he has never made, how many recipes does the cookbook contain?
Build a truth table for the statement ~(pvq)^~p
2x2
00 piece jigsaw puzzle. the completed puzzle is 10x10. each piech connects to at least 2 other pieces. i plan to assemble by taking pieces out of box one by one. if i've already taken out 2 pieces that dont directly connect, what is the minimum number of additional pieces that i need to draw to in order to guarentee that the original 2 pieces connect?
Find I (Intrest) using simple interest formula of 17700 @ 15% for 4 years
A confidence interval for a population mean has a margin of error of 3.5. a. Determine the length of the confidence interval. b. If the sample mean is 47.8 ​, obtain the confidence interval. a. The length of the confidence interval is?
Hola👋🏻 Toca en "Crear Nueva Tarea" para enviar tu problema de matemáticas. ¡Uno de nuestros expertos comenzará a trabajar en ello de inmediato!
Slope (7,3) and (9,5)
The supply of a good registers periodic increases. With each increase in the offer, the total receipts of the bidders increase. Indicate the correct statement: a) demand is elastic b) demand is inelastic c) supply is inelastic d) supply has unit elasticity.
An invoice for €2,880 plus default interest of €48.40 was paid on October 28th. Interest rate 5.5%. When was the bill due?