May we discuss starting with a stable/fixed known Real rate of Return and calculate the equivalent nominal units? Those investors who buy nominal interest rate instruments know the nominal rate of return they will receive. But, they cannot know the real rate of return they will receive because it is a variable to them. That is because they cannot predict the rate of change in the price index, be it CPI+U or GDP as Shiller suggests, which is the usual measure of erosion of purchasing power. Because of this, the realized real rate of return, rn = ((1 + in ) − 1) / (1 + cn )), defined as the quotient less one of one plus the nominal rate over the quantity one plus the index rate, is volatile f
What is RRM and what does it deliver?
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