Inflation-Adjusted Returns Calculator

Calculate Inflation-Adjusted Return



Formula

The formula to calculate the inflation-adjusted return (r_i) is:

\[ r_i = \left( \frac{1 + r_n}{1 + i} \right) - 1 \]

Where:

Definitions

Example

Let's say the nominal return (r_n) is 8% and the inflation rate (i) is 3%. Using the formula:

\[ r_i = \left( \frac{1 + 0.08}{1 + 0.03} \right) - 1 \]

We get:

\[ r_i = \left( \frac{1.08}{1.03} \right) - 1 \approx 0.0485 \, \text{or} \, 4.85\% \]

So, the inflation-adjusted return is approximately 4.85%.