Fisher equation is a mathematical formula used to estimate the relationship between nominal interest rate, real interest rate and inflation.
It is commonly used to calculate internal rate of return IRR, bonds and Yield to maturity YTM.
It was invented by Mr. Irving Fisher whose major work related to financial interests.
The fisher equation says that real interest rate is equal to nominal interest rate less future expected inflation.
i denote nominal interest rate
r denotes real interest rate
z denotes inflation rate
Then Fisher equation is as follows:
r= I – z