Real vs nominal return

Real vs nominal return — a nominal return counts pesos; a real return counts what those pesos buy. Real return = (1 + nominal) ÷ (1 + inflation) − 1, or roughly nominal minus inflation. A savings account netting 2.4% during 4.8% inflation has a real return of about −2.3%: the balance grew while the purchasing power shrank.

First used in: 1.1 · The two hurdles: benchmarking math I