Real rate of return


Also found in: Acronyms.

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 ?
The crossover time for the UK is just over 20 years with a 9 per cent real rate of return. It is 36 years with a 3 per cent rate of return and with 2.4 per cent aggregate labour productivity growth.
(6) Empirically, r>g is satisfied if we measure r by the long-run average real rate of return on equity (not the safe real interest rate) and g by the long-run average growth rate of output or consumption.
In addition, using 2%-3% as real rate of return is more appropriate, particularly because the estimates extend over a much longer period than most types of lending, and they are more consistent with recent projections (CBO 2015).
Rit real rate of return on shares of i-th company achieved on day t in case of information,
Savers, even with interest rates at historically low levels, can find a real rate of return at the moment without too much effort and investors are often reaping significant real returns.
The unitized risk values for the real rate of return for the DJIA Index are indicated on the basis of the data presented in Table 1 and Figure 2.
The real rate of return (return minus consumer price inflation) was negative (see Price Trends).
Of the remaining 73, those who fared the best were, once again, entrepreneurs and investors, with an annual real rate of return of 5.6 percent over the last 26 years, the Tax Foundation says.
However, your real rate of return would have been negative.
Getting a positive real rate of return is effectively impossible for the proverbial widows and orphans.
* Fixed-income securities, such as longterm bonds, that are often considered safe investments, may have a negative real rate of return after inflation.