Real Rate of Return Calculator

Real Rate Of Return:

..

Background Information

What does Real Rate of Return mean?: The real rate of return is the annual percentage return realized on the investment that is adjusted for changes in prices due to inflation or other external effects.

Formula: Real Rate of Return = (1 + Nominal Rate) / (1 + Inflation Rate) – 1

Example

Ms Sean has kept $100,000 in a bank. The bank promises to pay 6% rate of return by the end of the year. The inflation rate is 3% during the particular year.

According, to the formula, Real Rate of Return is:-

= (1 + 0.06) / (1 + 0.03) – 1
= 1.06 / 1.03 – 1
= 0.0291 = 2.91%

Real Rate of Return Calculator

Updated: Jun 10, 2018

Background Information