Calculation of a real interest rate (Fisher equation) formula
Description of the Calculation of a real interest rate (Fisher equation) formula
This formula allows the calculation of a real interest rate for a given period, using an estimated rate of inflation. It is known under the name Fisher equation.
Formula
\[ i_{r} = \frac{1+i_{nom}}{1+r^{est}_{inf}}-1 \ \]
Symbols
\(i_{nom}\ \)
Nominal interest rate
\(r^{est}_{inf}\ \)
Estimated rate of inflation