Real Interest Rate
Calculate real interest rate from nominal rate and inflation with the Fisher relation.
How to use
- Enter nominal interest and inflation percentages.
Capabilities and scope
Unlike the nominal-minus-inflation approximation, it uses (1+nominal)/(1+inflation)−1.
How it works
real=((1+n)/(1+i)−1)×100; the runner also compares the approximation.
Example
5% nominal and 3% inflation give about 1.94% exact real rate.
Useful for
- Compare returns in purchasing-power terms
Before you use it
- Taxes, personal inflation baskets, and investment risk are excluded.
Frequently asked questions
Why not simply 5−3=2%?
The exact Fisher relation includes the interaction between the two rates.