# Fisher Equation Calculator

This tool is used to calculate the real interest rate, nominal interest rate and inflation rate by using fisher equation.

# Results

In order to find the real rate of return, we use the Fisher equation. The equation states that:

(1 + i) = (1 + r) (1 + π)

We can rearrange the equation to find real interest rate:

r = (1 + i)(1 + π)-1

Therefore, the real interest rate, or actual return on investment, of the portfolio equals:

r = (1 + 3.25)(1 + 2)-1

r = 1.0331.020-1

r = 1.012 - 1

Real Interest = 1.23%

## Formula To Calculate Fisher Equation :

The Fisher equation is a concept of economics stating the relationship between nominal interest rates and real interest rates under inflation.

The Fisher equation is expressed through the following formula:

(1 + i) = (1 + r) (1 + π)

Where,

r = the real interest rate, The real interest rate refers to the amount reflecting the buying capacity of the money borrowed over a specific time.

i = the nominal interest rate, The nominal rate of interest is the type of interest rate which is measured before considering the inflation in an economy.

p = the inflation rate, The inflation rate is a measure of the price inflation comprehending the annual percentage change in the consumer price index (CPI).

However, one can also use the approximate version of the previous formula:

i ≈ r + p