What is a 'Real Rate Of Return'
A real rate of return is the annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other external effects. This method expresses the nominal rate of return in real terms, which keeps the purchasing power of a given level of capital constant over time.
BREAKING DOWN 'Real Rate Of Return'
Adjusting the nominal return to compensate for factors such as inflation allows investors to determine how much of their nominal return is actually real return.
For example, let's say your bank pays you interest of 5% per year on the funds in your savings account. If the inflation rate is currently 3% per year, then the real return on your savings today would be 2%. In other words, even though the nominal rate of return on your savings is 5%, the real rate of return is only 2%, which means that the real value of your savings only increases by 2% during a oneyear period.

Real Interest Rate
An interest rate that has been adjusted to remove the effects ... 
Nominal Interest Rate
The interest rate before taking inflation into account. The equation ... 
Nominal Rate Of Return
The amount of money generated by an investment before expenses ... 
AfterTax Real Rate Of Return
The actual financial benefit of an investment after accounting ... 
InflationProtected Security  ...
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Nominal
An unadjusted rate, value or change in value. This type of measure ...

Markets
What's a Real Rate of Return?
A real rate of return is an annual percentage investment return thatâ€™s adjusted for inflation, taxes or other factors. 
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What Does Nominal Mean?
Nominal refers to an unadjusted value or change in value. 
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What is a Nominal Value?
The nominal value of a security, such as a stock or bond, remains fixed for the duration of its life. 
Markets
Understanding the Fisher Effect
The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate. 
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Interest Rates: Nominal and Real
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Retirement Planning: Why Real Rates of Return Matter Most
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Projected Returns: Honing The Craft
Find out how to forecast longterm returns on the three major asset classes. 
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How To Measure Returns On The Series 65 Exam
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The International Fisher Effect: An Introduction
The Fisher models have the ability to illustrate the expected relationship between interest rates, inflation and exchange rates.

What is the difference between real and nominal interest rates?
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How do nominal interest rates in finance differ from the nominal rate of interest ...
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If markets give information on value through price, how can nominal values be out ...
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Is the nominal value of a security ever also the real value?
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What does it signify if there is a large discrepancy between a nation's real and ...
Discover the differences between real GDP and nominal GDP and what it means when there is a large discrepancy between the ... Read Answer >> 
How does the Fisher effect illustrate returns on bonds?
Learn how the Fisher effect shows the impact of expected future increases in inflation on the prices of bonds and their interest ... Read Answer >>