Define: Real Rate Of Return

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Definition: Real Rate Of Return



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Full Definition of Real Rate Of Return


The real rate of return is the rate of return on an investment after taking inflation into account. The nominal rate of return (ignoring inflation) is higher than the real rate of return if inflation is positive. The higher the level of inflation, the larger the difference between the real rate of return and the nominal rate of return. The longer the period of the rate of return, the more important it is to consider the real rate of return. The real rate of return is zero if the nominal rate of return matches inflation. The real rate of return is negative if the nominal rate of return is less than the rate of inflation. Unless inflation is very high, the real rate of return will be very close to the nominal rate of return over short periods.


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Definition Sources


Definitions for Real Rate Of Return are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 6th February, 2020