nominal / real / inflation summary
I think I finally got it!
Nominal rate takes into acccount inflation --> Nominal = 1+real * 1+inflation
At the same time, Real Return Bonds are Government bonds that pay you a rate of return that is adjusted for inflation. whereas nominal bonds don't.
Thus, we MUST NOT CONFUSE nominal return of a bond (does not consider inflation) with required nominal return (considers inflation). Am I correct? Can someone confirm/ clarify? |