Fisher Effect Calculator

Your details

Choose the unknown you want to calculate. The other two fields are your inputs.
The stated rate on a loan, bond, or savings account before adjusting for inflation.
%
The inflation-adjusted rate. This is the true change in purchasing power earned or paid.
%
The anticipated annual inflation rate for the same period as the interest rates. Can be negative for deflation.
%
Exact result
0.0388%

Solved using the full multiplicative Fisher equation

Additive approximation0.04%
Basis-point error-11.65bp
Solving forReal interest rate
Exact (Fisher)0.0388%
Approximation (additive)0.04%

Real interest rate: 3.8835% (exact Fisher equation)

  • A nominal rate of 7% with 3% expected inflation gives a real return of 3.8835%.
  • The real rate is positive: the nominal rate more than compensates for inflation, so purchasing power grows over time.
  • The additive approximation differs from the exact result by 11.65 basis points. When rates and inflation are this high, use the exact multiplicative form.

Next stepFor bond investing, compare this real yield to the expected return on inflation-protected securities (TIPS or index-linked gilts) to see which offers better real value.

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