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    A father wants to make a one-year bank fixed deposit at 9% interest. While fixed deposits provide assured returns, when adjusting for 11% inflation, the real rate of return is negative 1.8%. The formula to calculate real rate of return is: Real rate of return = ((1 + Rate of Return) / (1 + Inflation Rate) - 1) * 100

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    A father wants to make a one-year bank fixed deposit at 9% interest. While fixed deposits provide assured returns, when adjusting for 11% inflation, the real rate of return is negative 1.8%. The formula to calculate real rate of return is: Real rate of return = ((1 + Rate of Return) / (1 + Inflation Rate) - 1) * 100

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    5 views1 page

    Real Rate of Return

    Uploaded by

    api-26217250
    A father wants to make a one-year bank fixed deposit at 9% interest. While fixed deposits provide assured returns, when adjusting for 11% inflation, the real rate of return is negative 1.8%. The formula to calculate real rate of return is: Real rate of return = ((1 + Rate of Return) / (1 + Inflation Rate) - 1) * 100

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
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    of 1

    9.

    Real Rate of Return

    July 22, 2008

    My father wants to make a one-year bank FD at 9 per cent. On maturity, he says, the
    capital will be preserved and he would get assured return on it.

    It is true that fixed deposit is safe and gives assured returns. However, after adjusting for
    inflation, the real rate of return can be negative.

    Formula: Real rate of return=[(1+ROR)/(1+i)-1]*100

    Type in: =((1+9%)/(1+11%)-1)*100 and hit enter. -1.8% is the real rate of return. ROR:
    Rate of return per annum; i: rate of inflation (11 per cent here).

    Image: A man walks out of The Reserve Bank of India building in Mumbai. |
    Photograph: Sajjad Hussain/AFP/Getty

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