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- $1\; +\; RS\_\{t\}=frac\{P\_\{t\}\}\{P\_\{t-1\}\}.$

The continuously compounded return is the value of RS_{t} that satisfies

- $RS\_\{t\}=lnleft\; (frac\{P\_\{t\}\}\{P\_\{t-1\}\}right\; ).$

Thus,

The simple real return rst from t − 1 to t is

- $pr\; =\; t\; -\; n\; /\; log\; (rst).$

The continuously compounded inflation rate is the value of ICt that satisfies. Thus, the continuously compounded real return is the value of rct that satisfies.

Thus, the continuously compounded real return is just the continuously compounded nominal return minus the continuously compounded inflation rate.

Alternatively, the continuously compounded nominal return RCt is the real return rct plus the inflation rate ICt.

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Last updated on Sunday November 11, 2007 at 10:47:29 PST (GMT -0800)

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This article is licensed under the GNU Free Documentation License.

Last updated on Sunday November 11, 2007 at 10:47:29 PST (GMT -0800)

View this article at Wikipedia.org - Edit this article at Wikipedia.org - Donate to the Wikimedia Foundation

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