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  • Definition of Real Rate of Return

Approximation Formula for the Real Rate of Return

The real rate of return can be approximated by subtracting the inflation rate from the nominal rate of return. This simple formula is used to adjust the nominal return for the effects of inflation, providing an estimate of the change in an investment's purchasing power. The formula is expressed as: real rate of return≈nominal rate of return−inflation rate\text{real rate of return} \approx \text{nominal rate of return} − \text{inflation rate}.

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Introduction to Macroeconomics Course

Ch.6 The financial sector: Debt, money, and financial markets - The Economy 2.0 Macroeconomics @ CORE Econ

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Learn After

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