Inflation and Real Rate of Interest Calculator

Enter 2 out of 3 below
Nominal Interest Rate % (n) Inflation Rate % (i) Real Interest Rate % (r)
  

Given a nominal interest rate of 4.8% and an inflation rate of 1%, calculate the real interest rate:

The relation between a nominal interest rate (n), inflation (i), and the real rate of interest (r) is shown in the following equation:
1 + n = (1 + i)(1 + r)

Divide each side of the equation by (1 + i):

1 + n
1 + i
=
  
(1 + i)(1 + r)
1 + i

Solving for r, we get:
1 + r  =  1 + n
  1 + i

1 + r  =  1 + 0.048
  1 + 0.01

1 + r  =  1.048
  1.01

  1 + r  =  1.0376237623762

  r  =  1.0376237623762 - 1

  r  =  0.03762

Convert Real Interest Rate to a Percentage - Multiply Real rate by 100%:
Real Interest Rate * 100% = 0.03762 * 100%
Real Rate of Interest = 3.76%






What is the Answer?

Real Rate of Interest = 3.76%

How does the Inflation and Real Rate of Interest Calculator work?

Calculates Real rate of Interest, Inflation, and nominal interest rate before inflation.
This calculator has 3 inputs.

What 1 formula is used for the Inflation and Real Rate of Interest Calculator?

  1. 1 + n = (1 + i)(1 + r)

For more math formulas, check out our Formula Dossier

What 5 concepts are covered in the Inflation and Real Rate of Interest Calculator?

inflation
a general increase in the prices of goods and services in an economy
inflation and real rate of interest
interest rate
the proportion of a loan that is charged as interest to the borrower or proportion of principal credit given to a depositor
noinal interest rate
percent
a specified amount in or for every hundred. one part in every hundred.
n% = n/100

Inflation and Real Rate of Interest Calculator Video


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