Calculator
Real vs. Nominal Return Calculator
See how much of a nominal return inflation actually eats into — and how the quick approximation compares to the precise calculation.
← Read the Real vs. Nominal Returns concept pagePrecise real return
3.88%
Approximate real return
4.00%
Gap between the two
0.12%
How the math works
The approximation just subtracts: nominal − inflation = 7.0% − 3.0% = 4.00%.
The precise version divides instead: (1 + nominal) / (1 + inflation) − 1 = 3.88%. At these rates, the two methods differ by 0.12% — a small gap here, but one that widens as the rates involved get larger, since the approximation ignores the interaction between the two rates.