Real rate of return

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Real rate of return

The percentage return on some investments that has been adjusted for inflation.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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%.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
More generally, r does not have to be constant and can be viewed as an average of expected present and future real rates of return on capital.
We illustrate that using lower real rates of return would increase the present value of taxes and decrease the present value of benefits, thus making the two entitlement programs look less generous.
Long-term corporate and government bonds suffered four consecutive decades of negative real rates of return beginning in the 1940s.
"Real rates of return on safe assets have been declining relative to the real return on capital in the U.S.
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.