nominal interest rate minus the rate of inflation equals real interest rate.
nominal interest rate minus the rate of inflation equals real interest rate.
nominal interest rate minus the rate of inflation equals?
real interest rate
section::::real interest rates.









































as was shown in the section above on the real growth rate,









































where









































and as a first-order approximation,









































in the case where the growing quantity is a financial asset, formula_12 is a nominal interest rate and formula_6 is the corresponding real interest rate; the first-order approximation formula_20 is known as the fisher equation.









































looking back into the past, the "ex post" real interest rate is approximately the historical nominal interest rate minus inflation. looking forward into the future, the expected real interest rate is approximately the nominal interest rate minus the expected inflation rate.









































section::::cross-sectional comparison.
real versus nominal value (economics)
the nominal interest rate (also known as an annualised percentage rate or apr)*{aside: this doesn't look right: the apr is an annualized rate that lumps in all charges (fees, initial costs, and so on) and is always a rate used for comparison between lenders, rather than the nominal interest rate, which is quoted by lenders and is the actual rate used in the calculation of, say, monthly payments} is the periodic interest rate multiplied by the number of periods per year. for example, a nominal annual interest rate of 12% based on monthly compounding means a 1% interest rate per month (compounded). a nominal interest rate for compounding periods less than a year is always lower than the equivalent rate with annual compounding (this immediately follows from elementary algebraic manipulations of the formula for compound interest). note that a nominal rate without the compounding frequency is not fully defined: for any interest rate, the effective interest rate cannot be specified without knowing the compounding frequency "and" the rate. although some conventions are used where the compounding frequency is understood, consumers in particular may fail to understand the importance of knowing the effective rate.
nominal interest rate