**How To Calculate Risk Free Rate in Excel**

Generally, the central bank of a country guarantees a risk-free rate on government bonds or bank deposits.

**Real vs Nominal Risk-Free Rate**

Nominal risk-free interest rate does not consider inflation. It is the stated interest on a loan or return on an investment without considering macroeconomic impacts or compounding of interest.

Real risk-free rate is adjusted to the effects of inflation. It reflects the real cost that the borrower withdraws of investor invests.

The real risk-free rate should be considered while taking a business decision for profitability of a project.

**Conversion between Real and Nominal Risk-Free Rate**

**Risk-Free Interest Rate**

Risk Free Rate of Return Formula = (1+ Government Bond Rate)/ (1+Inflation Rate)-1

**Calculate Using Excel**

**Step 1:** Insert the input data available from the website of the central bank of the country.

**Step 2:** Calculate the Real Rate using the formula.

Risk Free Rate of Return Formula = (1+ Government Bond Rate)/ (1+Inflation Rate)-1

**Step 3:** Calculate Nominal Risk-Free Rate.

The formula is: Nominal Risk Free Rate of Return Formula = (1+ Real Risk free rate)/ (1+Inflation Rate)

**Template**

Further reading: Basic concepts Getting started with Excel Cell References