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?