Real Rate of Return Calculator is a tool that helps an investor to find out what actually he gets in return for investing a specific sum of money in an investment
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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:-