Editing Real and nominal value (section)

==Real interest rates==
{{Main|Real interest rate}}

As was shown in the section above on the real growth rate,

:<math>1 + r_t = \frac{1 + g_t}{1 + i_t}</math>

where

:<math>r_t</math> is the rate of increase of a quantity in real terms,

:<math>g_t</math> is the rate of increase of the same quantity in nominal terms, and

:<math>i_t</math> is the rate of inflation,

and as a first-order approximation,

:<math>r_t = g_t - i_t.</math>

In the case where the growing quantity is a [[financial asset]], <math>g_t</math> is a [[nominal interest rate]] and <math>r_t</math> is the corresponding [[real interest rate]]; the first-order approximation <math>r_t = g_t - i_t</math> is known as the [[Fisher equation]].<ref>{{cite book | last=Benninga | first=Simon |author2=Oded Sarig  | year=1997 | title=''Corporate Finance: A Valuation Approach'' | publisher=[[The McGraw-Hill Companies]] | pages=[https://archive.org/details/corporatefinance00benn/page/21 21] | isbn=0-07-005099-6 |url=https://archive.org/details/corporatefinance00benn | url-access=registration }}</ref> Looking back into the past, the [[Ex post#ex post|''ex post'']] real interest rate is approximately the historical nominal interest rate minus inflation. Looking forward into the future, the expected real interest rate is approximately the nominal interest rate minus the expected inflation rate.