The **real interest rate** is the rate of interest an investor expects to receive after allowing for inflation. It can be described more formally by the Fisher equation, which states that the real interest rate is approximately the nominal interest rate minus the inflation rate. If, for example, an investor were able to lock in a 5% interest rate for the coming year and anticipated a 2% rise in prices, he would expect to earn a real interest rate of 3%. This is not a single number, as different investors have different expectations of future inflation. Since the inflation rate over the course of a loan is not known initially, volatility in inflation represents a risk to both the lender and the borrower.

Read more about Real Interest Rate: Risks, Importance in Economic Theory, Negative Real Interest Rates, Calculating Real Interest Rates Using Change in Value, See Also, External Links

### Other articles related to "interest rate, rate, real, real interest rate, interest, interest rates":

... These variables always include a short-run

**interest rate**and an exchange

**rate**... of aggregate demand in an open economy, which include variables such as the

**real**exchange

**rate**as well as the

**real interest rate**... Since the MCI is a function of the

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**rate**, the MCI is influenced by events such as terms of trade shocks, and changes in business and consumer confidence ...

... regular monthly payments is augmented by the monthly

**interest**charge and decreased by the payment so , where i = loan

**rate**/100 = annual

**rate**in decimal. 10% = 0.10 The loan

**rate**is the

**rate**used to compute payments and balances.) r = period

**rate**= i/12 for monthly payments (customary usage for convenience) B0 = initial balance (loan principal ... in spreadsheet programs can be used to calculate the monthly payment of a loan An

**interest**-only payment on the current balance would be ...

... Function (MPRF) is the upward-sloping relationship between the inflation

**rate**and the unemployment

**rate**... When the inflation

**rate**rises, a central bank wishing to fight inflation will raise

**interest rates**to reduce output and thus increase the unemployment

**rate**... unemployment rises when the central bank raises the

**real interest rate**r because it thinks that inflation is too high and needs to be reduced ...

**Real Interest Rate**- External Links

... "Equilibrium

**Real Interest Rate**," by Roger Ferguson, 2004 ... On the distinction between

**real**return and nominal bonds, by Peter Spiro, 2004 ...

... CD

**interest rates**closely track inflation ... For example, in one situation

**interest rates**may be 15% and inflation may be 15%, and in another situation

**interest rates**may be 2% and inflation may be 2% ... Of course, these factors cancel out, so the

**real interest rate**is the same in both cases ...

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“God is a character, a *real* and consistent being, or He is nothing. If God did a miracle He would deny His own nature and the universe would simply blow up, vanish, become nothing.”

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—William Hazlitt (1778–1830)