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Investopedia explains 'Real Interest Rate'
The real interest rate is the growth rate of purchasing power derived from an investment. By adjusting the nominal interest rate to compensate for inflation, you are keeping the purchasing power of a given level of capital constant over time.
For example, if you are earning 4% interest per year on the savings in your bank account, and inflation is currently 3% per year, then the real interest rate you are receiving is 1% (4% - 3% = 1%). The real value of your savings will only increase by 1% per year, when purchasing power is taken into consideration.
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