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Real Rate of Return Formula

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Real Rate of Return is the annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other external effects. Check FAQs

Real RR = (\frac{1 + NR}{1 + IR}) - 1

Real RR - Real Rate of Return?NR - Nominal Rate?IR - Inflation Rate?

Real Rate of Return Example

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Here is how the Real Rate of Return equation looks like with Values.

Here is how the Real Rate of Return equation looks like with Units.

Here is how the Real Rate of Return equation looks like.

0.8182 = (\frac{1 + 19}{1 + 10}) - 1

0.8182 = (\frac{1 + 19}{1 + 10}) - 1

0.8182 = (\frac{1 + 19}{1 + 10}) - 1

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Real Rate of Return Solution

Follow our step by step solution on how to calculate Real Rate of Return?

FIRST Step Consider the formula

Real RR = (\frac{1 + NR}{1 + IR}) - 1

Next Step Substitute values of Variables

∴

Real RR = (\frac{1 + 19}{1 + 10}) - 1

Next Step Prepare to Evaluate

∴

Real RR = (\frac{1 + 19}{1 + 10}) - 1

Next Step Evaluate

∴

Real RR = 0.818181818181818

LAST Step Rounding Answer

∴

Real RR = 0.8182

Real Rate of Return Formula Elements

Variables

Real Rate of Return

Real Rate of Return is the annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other external effects.

Symbol: Real RR

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Real Rate of Return

Nominal Rate

Nominal Rate refers to the interest rate before taking inflation into account.

Symbol: NR

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Nominal Rate

Inflation Rate

Inflation Rate is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.

Symbol: IR

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Inflation Rate

Other formulas in Important Formulas of Investment category

Go Certificate of Deposit

CD = P0 Deposit \cdot {(1 + (\frac{r Annual}{n c}))}^{n c \cdot n t}

Go Compound Interest

FV = A \cdot {(1 + (\frac{i}{n}))}^{n \cdot T}

Go Capital Gains Yield

CGY = \frac{P c - P0}{P0}

Go Risk Premium

RP = ROI - Rf return

How to Evaluate Real Rate of Return?

Real Rate of Return evaluator uses Real Rate of Return = ((1+Nominal Rate)/(1+Inflation Rate))-1 to evaluate the Real Rate of Return, Real Rate of Return is the annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other external effects. Real Rate of Return is denoted by Real RR symbol.

How to evaluate Real Rate of Return using this online evaluator? To use this online evaluator for Real Rate of Return, enter Nominal Rate (NR) & Inflation Rate (IR) and hit the calculate button.

FAQs on Real Rate of Return

What is the formula to find Real Rate of Return?

The formula of Real Rate of Return is expressed as Real Rate of Return = ((1+Nominal Rate)/(1+Inflation Rate))-1. Here is an example- 0.818182 = ((1+19)/(1+10))-1.

How to calculate Real Rate of Return?

With Nominal Rate (NR) & Inflation Rate (IR) we can find Real Rate of Return using the formula - Real Rate of Return = ((1+Nominal Rate)/(1+Inflation Rate))-1.

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Real Rate of Return Formula

Real Rate of Return Example

Real Rate of Return Solution

Real Rate of Return Formula Elements

Other formulas in Important Formulas of Investment category

How to Evaluate Real Rate of Return?

FAQs on Real Rate of Return

Variable Name