A bond that pays interest annually yields a rate of return of 9.25 percent. The inflation rate for the same period is 4 percent. What is the real rate of return on this bond?

5%

Explanation:

From the question, we are informed that a bond that pays interest annually yields a rate of return of 9.25 percent and that the inflation rate for the same period is 4 percent.

The real rate of return on this bond will be calculated as:

= (1+nominal rate)/(1+inflation rate) - 1

= (1 + 9.25%)/(1 + 4%) - 1

= (1 + 0.0925)/(1 + 0.04) - 1

= (1.0925/1.04) - 1

= 1.05 - 1

= 0.05

= 5%