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The concept of real interest rate is useful to account for the impact of [[inflation]]. In the case of a loan, it is this real interest that the lender effectively receives. For example, if the lender is receiving 8 percent from a loan and the inflation rate is also 8 percent, then the (effective) real rate of interest is zero: despite the increased nominal amount of currency received, the lender would have no monetary value benefit from such a loan because each unit of [[currency]] would get devaluated due to inflation by the same factor as the nominal amount gets increased.
and the inflation rate value <math>i</math> is given by<ref>Richard A. Brealey and Steward C. Meyer. ''[[Principles of Corporate Finance]],'' Sixth Edition. Irwin McGraw-Hill, London, 2000. p. 49.</ref>
:<math>(1+r)=(1+R)/(1+i) \, </math>
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