Real rate

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Revision as of 08:52, 13 August 2013 by imported>Doug Williamson (Change square brackets to round, and spread out.)
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A rate which has been restated to exclude the effects of inflation.

The relationship between the Real rate, the Nominal rate and the Inflation rate is: Real rate = ( (1 + Nominal rate)/(1 + Inflation rate) ) - 1


For example if the Nominal rate of return = 6% (0.06) and the Inflation rate = 3% (0.03),

then the Real rate of return = 1.06/1.03 - 1 = 0.0291 = 2.91%.


See also

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