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Real vs Nominal Rate (Fisher) Calculator

Work out real vs nominal rate (fisher) instantly with clear inputs, formula shown and shareable results.

About Real vs Nominal Rate (Fisher) Calculator

The Fisher equation separates the reward for waiting from the compensation for inflation: (1 + nominal) = (1 + real)(1 + inflation). Subtracting inflation from the nominal rate is only an approximation and overstates the real return.

Formula

Fisher relation

real = (1 + nominal)/(1 + inflation) - 1

nominal
Nominal return
inflation
Inflation rate

Worked example

With the default values below, Real vs Nominal Rate (Fisher) Calculator returns Exact Real Return (Fisher) of 4.7170%. Change any input above and every figure here is recalculated in your browser.

Inputs used

Nominal Returnaccepts 0–100 %
11 %
Inflation Rateaccepts 0–100 %
6 %
Amount Investedminimum 0
100,000

Results

Exact Real Return (Fisher)
4.7170%
Rule-Of-Thumb Real Return
5.0000%
Overstatement By The Rule Of Thumb
0.2830%
Real Gain On The Amount
$4,716.98

Step by step

  1. 1Values used
  2. 2Fisher relation
  3. 3Exact Real Return (Fisher)= 4.7170
  4. 4Rule-Of-Thumb Real Return= 5.0000
  5. 5Overstatement By The Rule Of Thumb= 0.2830
  6. 6Real Gain On The Amount= 4,716.98

Assumptions and limits

  • The result is derived only from the 3 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take tax, fees or charges or compounding frequency into account.
  • Figures are rounded for display to 4 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • Figures are estimates for planning only. Rates, mortality and market assumptions change. This is not financial, actuarial or tax advice.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Figures are estimates for planning only. Rates, mortality and market assumptions change. This is not financial, actuarial or tax advice.

Frequently Asked Questions

How large is the approximation error?

Roughly real × inflation. At 11% nominal and 6% inflation the shortcut overstates the real return by about 0.28 points.

Can the real return be negative?

Yes. Whenever inflation exceeds the nominal return your purchasing power falls even though the balance grows.

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