Why do we start with a nominal rate and have no idea what the REAL Rate of Return is going to be?
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 pur