# Real interest rate using Fisher equation

This online calculator calculates real interest rate from nominal interest rate with adjustment for inflation using Fisher equation

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#### Timur

Created: 2020-01-20 10:18:28, Last updated: 2021-02-25 08:12:02

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When you receive the repayment of principal plus interest at the end of a year, interest is calculated using the nominal interest rate. However, if there is inflation, your money lost some buying power, compared against the buying power of the principal amount at the time it was deposited. So, if you want to get your real interest rate, you should take inflation into account. The relationship between nominal and real interest rates under inflation is given by the Fisher equation, named after Irving Fisher.

The Fisher equation is:

$1+i=(1+r)(1+\pi )$,

where
$i$ - nominal interest rate
$r$ - real interest rate
$\pi$ - inflation rate

Hence, the real interest rate would be

$r=\frac{1+i}{1+\pi} - 1$

Note that for small rates (several percents) Fisher equation can be approximated as

$i\approx r+\pi$

#### Real interest rate using Fisher equation

Real interest rate (percents)

Digits after the decimal point: 1

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