Real Interest Rate Calculator (Fisher Equation)

Your details

Choose which variable to calculate. The other two become inputs.
The stated (face) interest rate before adjusting for inflation, as a percentage per year.
%
The expected annual rate at which prices will rise. Use the CPI forecast or central-bank target.
%
Used only to draw the purchasing-power chart. Leave at 1,000 or enter your own amount.
USD
Number of years to project nominal and real growth in the chart below.
years
ResultMarginal real return
0.019%

The solved-for rate using the exact Fisher equation

Approximate result0.02%
Approximation error0.001%
Nominal interest rate0.05%
Inflation rate0.03%
Real interest rate0.019%
Nominal rate0.05%
Inflation rate0.03%
Real rate0.019%

Real return is 1.942% per year (positive but thin).

  • A nominal rate of 5.000% with 3.000% inflation gives a real return of 1.942% per year (exact Fisher equation).
  • The simple approximation (nominal minus inflation) gives 2.000%, which overstates the real rate by 0.058 percentage points.
  • Over 10 years, $1,000 grows to $1629 in nominal terms but only $1212 in real (inflation-adjusted) terms.

Next stepCompare this real rate against historical equity real returns (~5-7% long-run) to gauge whether holding cash or bonds is worthwhile.

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