Enter the nominal return and the inflation over the same time period to calculate the real return.
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Real Return Formula
The following formula is used to calculate the real return.
rR = NR – I
- Where rR is the real return (%)
- NR is the nominal return (%)
- I is the inflation (%)
Real Return Definition
A real return is defined as the nominal return of an investment or asset minus the inflation over the same time period.
Real Return Example
How to calculate real return?
- First, determine the nominal return.
Calculate the nominal return of the investment. For this example, we will say the return is 25%.
- Next, determine the inflation rate.
Measure the inflation rate over the same time period. For this example, we will say inflation is 3%.
- Finally, calculate the real return.
Using the formula we find the real return to be 25% – 3% = 22%.
A real return is the return on an investment after inflation is taken into account.