Pronunciation: [ɹˈi͡əl ɹˈe͡ɪt] (IPA) 
The term "real rate" refers to the interest rate adjusted for inflation. The word "real" is spelled /rɪəl/, with the stress on the first syllable. The "ea" spelling produces a long "e" sound, followed by an "a" sound, as in "hear" or "pear." The word "rate" is spelled /reɪt/, with the stress on the second syllable. The "a" spelling produces a long "a" sound, as in "face" or "hate." Together, the word is pronounced /rɪəl reɪt/.
The term "real rate" refers to a crucial financial concept that represents the actual return or interest earned on an investment after adjusting for the effects of inflation. It is the true rate of return in terms of purchasing power, as opposed to the nominal rate, which is the stated rate of interest without taking inflation into consideration. The real rate is calculated by deducting the inflation rate from the nominal rate.
The real rate helps investors and individuals gauge the actual growth of their investments or savings by accounting for the eroding effect of inflation on purchasing power. Inflation reduces the value of money over time, decreasing the ability to purchase goods and services. By measuring the real rate, investors can assess whether their investment is outpacing inflation and growing in real terms.
Understanding and considering the real rate is particularly important when comparing different investment options or planning for the future. It allows individuals to make more accurate decisions regarding their financial goals and expectations. A positive real rate indicates that the investment is growing in value after removing the impact of inflation, whereas a negative real rate implies a loss in purchasing power.
Given its fundamental role in financial planning and decision-making, the real rate is a crucial metric that provides insight into the true growth and value of investments.
The term "real rate" does not have a specific etymology. However, the word "real" comes from the Latin word "realis", meaning "actual" or "genuine". It entered the English language in the late 15th century. The word "rate" can be traced back to the late Middle English word "raten", which means "to consider as". When combined, "real rate" typically refers to the actual or adjusted rate of interest or return on an investment after accounting for inflation or other factors.
