It is approximated by subtracting inflation from the nominal rate. It helps describe the gain or cost in purchasing-power terms.
Real interest rate
In a nutshell
The real interest rate is an interest rate adjusted for inflation.
On this page
Explained simply
A practical example
Hypothetical example: an investment earns 5% while inflation is 3%; the real return is close to 2%, or about 1.94% using the exact calculation, before fees and tax.
Further reading
Source: Banque de France — Glossary.
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What this means
The exact real rate is (1.05 ÷ 1.03 − 1), about 1.94%, before fees and tax.
Educational scenarios. Amounts and rates are fictional, not current market conditions.