Which of the following statements about ‘Nominal and Real Rates of Return’ covered in the lecture are TRUE:

1. The nominal rate of return is just the actual rate of return received on an investment. The nominal rate of return can be decomposed into returns generated through changes in price and returns generated from income (such as interest, rent or dividends).
2. If the expected real rate of return on an investment is expected to be 4% per annum over the long-run and inflation increases from 2% to 3% per annum, the expected long-run nominal rate of return would be expected to increase from 6% to 7% per annum.