Real rate of return

(redirected from Inflation-Adjusted Rate of Return)

Real rate of return

The percentage return on some investments that has been adjusted for inflation.

Real Rate of Return

The rate of return on an investment after adjusting for inflation. It is calculated simply by taking the gross return and subtracting the inflation rate. For example, if the return on an investment is 7% and the inflation rate is 4%, the real rate of return is 3%.

Real rate of return.

You find the real rate of return on an investment by subtracting the rate of inflation from the nominal, or named, rate of return.

For example, if you have a return of 6% on a bond in a period when inflation is averaging 2%, your real rate of return is 4%. But if inflation were 4%, your real rate of return would be only 2%.

Finding real rate of return is generally a calculation you have to do on your own. It isn't provided in annual reports, prospectuses, or other publications that report investment performance.

References in periodicals archive ?
Professional managers would invest the GRA money at low fees, and the accounts would have a guaranteed inflation-adjusted rate of return, provide automatic annuities, and prevent withdrawals before retirement.
However, the calculation can take just one step by using an inflation-adjusted rate of return where both the present value and future value are expressed in current dollars.
An inflation-adjusted rate of return can be used instead (the Social Security model assumes a 3% inflation-adjusted rate of return).
This is a two-step process: Step 1: Calculate the inflation-adjusted rate of return factor: