Inflation-Adjusted Yield
Inflation-adjusted yield is the real return on property investment after removing the effects of inflation, providing accurate purchasing power growth measurement.
| Yield Calculation | Formula |
| Nominal yield | Cash flow / Investment (before inflation) |
| Inflation-adjusted yield | (1 plus nominal yield) / (1 plus inflation) minus 1 |
| Example: 7% nominal, 2% inflation | Real yield = 1.07 / 1.02 minus 1 = 4.9% |
| Simplified approximation | Nominal yield minus inflation rate |
| Accuracy | Exact formula more accurate for high inflation |
| Interpretation | Real purchasing power increase |
| Comparative Analysis | Scenario |
| Low inflation (1%) | 7% nominal = 5.9% real |
| Moderate inflation (3%) | 7% nominal = 3.9% real |
| High inflation (5%) | 7% nominal = 1.9% real |
| Negative real return | Occurs when inflation exceeds nominal yield |
| Investment decision | Compare real yields across asset classes |
| Long-term focus | Critical for retirement, endowment portfolios |
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