Real vs Nominal Return

Inspectable records

Ledger state

The current ledger marks this instrument verified clean within the source-bound verification corpus.

Area

Finance, Economics & Business (educational only — never individualized investment, tax, or legal advice)

Tranche

tranche-4

Evidence ID

t4-128

Ledger rows

1

No ledger note is attached.

Review findings

The formula is suitable as an educational estimate only after the input convention is made explicit. Update the formula label to use '=' under the stated effective-rate assumptions, or explain what approximation is intended. Preserve the existing educational-only and non-individualized-advice labeling.

Formula and scope findings

• The formula real_r=(1+nominal)/(1+inflation)-1 is the standard Fisher relation for effective nominal and inflation rates measured over the same period; under those assumptions it is exact, so the approximation symbol (≈) is mathematically imprecise.
• The spec does not define whether the nominal return and inflation rate are effective rates for the same period or whether either is an APR, simple rate, or annualized rate. Mixing these conventions can produce an invalid result.

Unit assumptions

• Inputs labeled as percentages are interpreted by converting percent to decimal before calculation: 8% becomes 0.08.
• Nominal return and inflation use the same time period and compounding basis.
• The nominal return is a total effective return before any taxes, fees, or other deductions.
• Output is converted back from decimal to percentage points.

Boundary hardening

BREAK_CLAIMED · SELF_FLAGGED

The formula has a hard singularity at inflation = -100%, requiring explicit input rejection. It also has no documented branch behavior around that singularity and is vulnerable to a 100-times scale error if percentage inputs are interpreted as decimal rates.

Errata and corrections

No applied erratum is attached to this unique-name record.

Inspectable example

4 review vectors are recorded. One source-bound sample is shown below.

{
  "inputs": {
    "nominal_return_pct": 8,
    "inflation_rate_pct": 3
  },
  "expected_outputs": {
    "real_return_pct": 4.85436893
  },
  "working": "Convert percentages: nominal=8/100=0.08; inflation=3/100=0.03. Compute real=(1+0.08)/(1+0.03)-1=1.08/1.03-1=108/103-1=5/103=0.0485436893. Convert to percent: 0.0485436893*100=4.85436893%."
}

Related workflows

Sources and evidence

These pointers bind the page to evidence. They do not grant authority or collapse verification into deployment.

• VERIFIED_LEDGER.json · VERIFIED_CLEAN
• evidence-tranche4/tranche4-results.json
• BOUNDARY_HAZARD_CATALOG.json