The Fisher equation in financial mathematics estimates the relationship between nominal and real interest rates under inflation. This equation is primarily used in YTM calculations of bonds or IRR calculations of investments.
The Fisher equation can be used in either ex-ante (before) or ex-post (after) analysis. Ex-post, it can be used to describe the real purchasing power of a loan:
r = i âˆ' Ï€ ...
Theory that nominal Interest rates and Inflation rates in different countries are connected. The Fisher equation says the nominal Interest rate is the product of one Plus the Real interest rate times one plus the expected rate of inflation. ...
 See also: Interest, Interest Rate, Rate, Analysis, Interest Rates
  
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