Real interest rate

Definition:

The rate of interest excluding the effect of expected inflation; that is, the rate that is earned in terms of constant-purchasing-power dollars. Interest rate expressed in terms of real goods, i.e. nominal interest rate adjusted for expected inflation.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Effective margin (EM)

Used with SAT performance measures, the amount equal to the net earned spread, or margin of income, on assets in excess of financing costs for a given interest rate and prepayment rate scenario.

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