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Why is the formula for real return this: Real return=(1+nominal rate)/((1+inflation rate))-1 And not this: real return=nominal return/inflation rate. Because if I do both formulas
Why is the formula for real return this:
Real return=(1+nominal rate)/((1+inflation rate))-1
And not this: real return=nominal return/inflation rate.
Because if I do both formulas I get different results.
For example:
(1.1165/1.034)-1=7.97%
AND if I do the other one I get:
(11.65%/3.4%)=3.43%
Thanks!!
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