Real rate of return

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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 ?
Long-term corporate and government bonds suffered four consecutive decades of negative real rates of return beginning in the 1940s.
He demonstrates that three factors--bottom-up versus top-down approach, equal nominal versus equal real rates of return across assets, and 28 versus 14 reproducible assets--account for more than 90 per cent of the difference in growth in capital service inputs.
Our extension seeks to include monetary considerations to extend Mulligan's analysis and assess the inter-linkages between monetary factors, real rates of return over the long run, and short-run real consumption preferences.
Suppose we also assume that (i) money and capital pay either the same real rate of return or closely related real rates of return (1) and (ii) the real return on money is the negative of the net inflation rate [pi].
Similarly, cash remains vulnerable to negative real rates of return given that current levels of inflation exceed short-term deposit rates in much of the developed and developing world.
HANIF AJARI: Household or consumer savings depend on many complex factors, the most important being income levels, relative price stability and positive real rates of return on savings.
Also, another future research may extend this analysis by exploring in more detail the implicit mechanisms between relative and absolute efficiency with real rates of return.
Household savings depend on many complex factors, the most important being income levels, relative price stability and positive real rates of return on savings.
For others, like the US, future sacrifices are already required, most likely through a combination of higher inflation, austerity, and "financial repression," as governments seek to impose on savers negative real rates of return.
Section 4 will focus on the multiplicative model which breaks up inflation from real rates of return, whereas section 5 addresses a multiplicative model that pieces together returns with transaction costs.