X-Message-Number: 27281
From: "marta sandberg" <>
Subject: The REAL interest rate
Date: Wed, 26 Oct 2005 15:35:49 +0800

John de Rivaz wrote:
>If the after tax return from a fixed interest is x% and the inflation rate
>is y% then the real return is x%-y%, call it r%.

- - -

If you wish to be very finicky, then the real rate of interest (R%) is

R% = (1+i%)/(1+r%) - 1

Where the expected rate of inflation is  'i%'  and the given or nominal
rate of return is  'r%'

Of course,  'r%-i%'  is a close approximation and much simpler.

Marta

Sorry John, but I am just studying for my Finance exam at university so I 
sometimes get a bit finicky.

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