Loading
Progresso di Studio
Across all your exams
Taught in English
Questo esame si sostiene in inglese: le lezioni e le domande sono in inglese. L'interfaccia resta in italiano.
Drag to pan · ⌘/Ctrl + scroll or pinch to zoom · tap a node for detail · +/− to expand a branch
Key formulas
Real interest rate
Strips inflation from the quoted rate to show real purchasing-power gain.
Future value (compound interest)
Present value
Discount a future cash flow back to today's value.
Part 1 of 1
The nominal interest rate is the rate as quoted — the number advertised by a bank or printed on a bond. It includes the effect of inflation.
The real interest rate strips inflation out to show the actual growth in purchasing power:
(The exact Fisher equation is: (1 + real) = (1 + nominal) ÷ (1 + inflation), but the approximation holds well when rates are low.)
Why it matters: if you earn 6% on a savings account but inflation is 4%, your purchasing power grows by only 2% — the real rate. You can buy more things with your money, but only 2% more, not 6% more.
The Fisher effect says that when expected inflation rises, rational lenders demand a higher nominal rate to protect their real return. As a result, nominal rates tend to track inflation expectations, while real rates remain comparatively stable over time.
Worked example
A government bond offers 5% nominal yield. If expected inflation is 1.5%, the real yield ≈ 3.5% — a modest positive real return. If inflation unexpectedly surges to 6%, the real yield becomes −1% — the bondholder's purchasing power is shrinking despite receiving interest payments.
Gain full lifetime access to all 3 lessons in Banking & Financial Institutions, interactive MindMaps, step-by-step solved questions, and full timed mock exams for Unito Business Administration.
Unlock Full Unito Business Administration Pass (€29)