Nominal and Real Returns.?

Question

An investment offers a 14 percent total return over the coming year. Bill Bernanke thinks the total real return on this investment will be only 9 percent. What does Bill believe the inflation rate will be over the next year?

Answer 1

The "real" rate of return is the return with inflation subtracted out. If an investment returns 8 percent but the inflation rate is 3 percent, the real rate of return is 5 percent. (The nominal rate of return is that 8 percent.)

Answer 2

real = nominal - inflation