What an investment earns in purchasing power, after inflation.
rᵣ = (1 + r) ÷ (1 + π) − 1
What each letter means
- r: Nominal return
- π: Inflation
An example
With r = 5%, π = 3%: Real return = 1.94%.
What an investment earns in purchasing power, after inflation.
With r = 5%, π = 3%: Real return = 1.94%.