Real Yield Calculator

Exact method: The Fisher equation links nominal yield, real yield, and inflation through the relation (1 + nominal) = (1 + real) × (1 + inflation). Solving for real gives real = (1 + nominal)/(1 + inflation) − 1. The calculator applies this formula and returns results in percent.

Approximation: For small rates, the real yield is often approximated by nominal − inflation. This linear approximation neglects the interaction (product) term and is less accurate as rates increase. The tool provides both values and flags where differences are material.

Inverse calculation: To find the nominal yield required to achieve a target real yield given expected inflation, the calculator rearranges the Fisher relation to nominal = (1 + real) × (1 + inflation) − 1.

This tool offers exact and approximate conversions between nominal and real yields and an inverse calculation to find implied nominal yield from a target real yield and inflation.

For precision-critical work, prefer the exact Fisher method, keep intermediate precision (four or more decimal places), and document input definitions (e.g., which inflation series and whether yields are pre- or post-tax).

Example 1 (exact): Nominal 6.00%, Inflation 2.00% → Real = ((1.06 / 1.02) − 1) × 100 = 3.92%. Approximation gives 4.00% (nominal − inflation). The difference is 0.08 percentage points.

Example 2 (approx): Nominal 3.00%, Inflation 2.00% → Exact real = 0.98% vs approximation 1.00%. Difference is small, so approximation is acceptable for quick estimates.

Example 3 (inverse): Desired real 3.50%, Inflation 2.00% → Nominal = ((1.035 × 1.02) − 1) × 100 = 5.57%.