real rate of interest.?

Question

real rate of interest = effective rate of interest - inflation rate

inflation rate = 31%

rate of interest = 25.6%

effective rate of interest = (1 + r/n)^n - 1

= (1 + (.256/12)^12 = 28.83%

real rate of interest = 28.83 - 31 = - 2.17%

would that be correct?

Answer 1

Take 100$
If compounded yearly at the end of the year you would have 125,6 $ but you would need 131 $ to buy what were 100$so you lost 5.4 $
So the real rate would be -5.4%
If compounded monthly your calculus would be right