Which statement best defines real return and its use in adviser decisions?

• A. Real return equals nominal return minus inflation; inflation-adjusted return reflects true purchasing power and risk-adjusted performance; used to compare investments.
• B. Real return equals inflation minus nominal return; inflation-adjusted return ignores purchasing power.
• C. Real return is simply the nominal return after taxes.
• D. Real return is the same as the risk-free rate.

Answer: (A)