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How to calculate Real interest rate

The Real interest rate formula, with plain worked examples you can check yourself.

Real interest rate = i − π

The result is a percentage (%).

Worked examples

i = 10% · π = 5%Real interest rate = 5%
i = 9% · π = 1%Real interest rate = 8%
i = 12% · π = 8%Real interest rate = 4%

How to use it

  1. Write down the values for each letter in the formula.
  2. Do the brackets first, then divide or multiply.
  3. Check the units before you compare results.
  4. Compare the answer with last period or with a competitor to see if it is good or bad.

This formula belongs to Cash & Liquidity.

Related terms

Interest rateReal interest rateCash flowLiquidityWorking capitalOverdraft

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