Real interest rate = Nominal interest rate – Inflation rate
Use the same time period for both rates
If using annual rates, subtract annual inflation from annual nominal interest
For a more accurate calculation, use the Fisher equation: Real interest rate = (1 + Nominal rate) / (1 + Inflation rate) – 1
Convert percentages to decimals before calculating
Convert the result back to a percentage if needed
Example: 8% nominal interest and 3% inflation = 5% real interest rate
Example using Fisher equation: (1.08 / 1.03) – 1 = 4.85% real interest rate