Answers the Question
How are inflation and interest rates related?
Calculator for Fisher Equation
What Is the Fisher Equation?
Named after Irving Fisher, the formula shows the relationship between nominal inflation, real inflation, and interest rates.
Why Is it Important?
- The formula is often used for cost-benefit analysis. It can be used to ensure that purchased bonds are paying enough to cover the ravages of inflation over their lifetimes.
Formula(s) to Calculate Fisher Equation
- 1 + NOMINAL INTEREST RATE = ( 1 + REAL INTEREST RATE) * (1 + INFLATION RATE)
- Improperly estimating the inflation rate.
- Improperly estimating the future inflation rate.