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# Real rate of return

AnalyticsTrade Team Last updated on 26 Apr 2023

# Real Rate of Return

The real rate of return is the rate of return on an investment after adjusting for inflation. It is a measure of the actual return on an investment, taking into account the effects of inflation. It is calculated by subtracting the inflation rate from the nominal rate of return. The real rate of return is important for investors because it allows them to compare the returns on different investments and determine which one is the most profitable.

## History of the Term

The concept of real rate of return has been around since the early 1900s. It was first used by economists to measure the purchasing power of money over time. The idea was to compare the purchasing power of money at different points in time, taking into account the effects of inflation. This allowed economists to measure the true value of money over time.

In the 1950s, the concept of real rate of return was adopted by investors. They began to use it to measure the actual return on their investments, taking into account the effects of inflation. This allowed investors to compare the returns on different investments and determine which one was the most profitable.

## Table of Comparisons

Investment Nominal Rate of Return Inflation Rate Real Rate of Return
Stock A 10% 2% 8%
Stock B 12% 2% 10%

## Summary

The real rate of return is the rate of return on an investment after adjusting for inflation. It is a measure of the actual return on an investment, taking into account the effects of inflation. It is important for investors because it allows them to compare the returns on different investments and determine which one is the most profitable. For more information on the real rate of return, you can visit websites such as Investopedia, The Balance, and Investing.com.

• Nominal Rate of Return
• Inflation Rate
• Time Value of Money
• Compound Annual Growth Rate
• Internal Rate of Return
• Net Present Value
• Real Interest Rate
• Real Return Bond
• Real Return Fund