# Real Rate of Return Calculator

Calculate your investment's true growth potential! Compare Nominal Rate of Return against Real Rate of Return with a handy chart. Link to Inflation Calculator included.

## Real Rate of Return Formula

The real rate of return formula adjusts the nominal rate of return for the effects of inflation to determine the true increase in purchasing power:

Real Rate of Return = ((1 + Nominal Rate of Return) / (1 + Inflation Rate)) - 1

Where:

**Real Rate of Return**: The true increase in purchasing power after accounting for inflation.**Nominal Rate of Return**: The stated annual percentage return on an investment before adjusting for inflation or taxes.**Inflation Rate**: The annual rate at which the general level of prices for goods and services rises, eroding purchasing power.

### Example

Let's say you have an investment with a nominal rate of return of 8% and an inflation rate of 3%. Plugging these values into the formula:

Real Rate of Return = ((1 + 0.08) / (1 + 0.03)) - 1

Real Rate of Return ≈ 0.0486, or 4.86%

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