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Fixed, floating or inflation-linked: which to choose

Compare the three ways fixed income pays over the same term and find the reference rate and inflation at which each one wins. See breakeven inflation, the breakeven reference rate, the taxable vs. tax-free equivalent and a table with the winner in each scenario.

Educational simulation. Not investment advice. Results are estimates based on the data you enter and do not replace advice from a qualified professional.

Reviewed on Oct 31, 2026

Example rates. Use real offers for the same term from your bank or broker.

Rates offered
Your scenario

For reference, look at your central bank’s projections and at the yields of government bonds for the same term.

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—Best option in your scenario
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What each option pays depending on the reference rate

Net value at the end of the term. The fixed rate does not change; the floating rate follows the reference rate. The inflation-linked option uses your inflation scenario.

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What each option pays depending on inflation

Net value at the end of the term. The inflation-linked option protects against inflation; the fixed rate loses buying power if inflation rises.

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Who wins in each rate and inflation scenario

The option with the highest net value for each combination.

Fixed rateFloatingInflation-linked
Comparison and equivalent rates

The summary lists your inputs, results, formulas, assumptions and sources. The full report also includes the charts and interpretations, in color. In the print dialog, choose Save as PDF.

Method, assumptions and sources

Formulas

Gross value = invested × (1 + yearly rate)^years; net = gross − (gross − invested) × tax rate
Floating: rate = average reference rate × % of reference; inflation-linked: rate = (1 + inflation) × (1 + real rate) − 1
Breakeven inflation = (1 + fixed) ÷ (1 + real rate) − 1; breakeven reference rate = fixed ÷ % of reference
Equivalent rate: tax-free X% equals taxable X ÷ (1 − tax rate)

Assumptions and limits

  • Calculations use the assumptions you enter. This is not investment advice.
  • Yearly compounding and constant average reference rate and inflation over the term; one tax rate applied to the gain at maturity.
  • It ignores price changes before maturity, issuer credit risk and deposit insurance limits.

Official sources and references

Frequently asked questions

What is the difference between fixed, floating and inflation-linked?

A fixed rate locks in the return when you invest. A floating rate pays a percentage of a reference rate and moves with interest rates. An inflation-linked bond pays inflation plus a fixed real rate, protecting your buying power.

How do I read the default example?

With $50,000 for 3 years, a 4.6% fixed rate, floating at 100% of the reference rate and inflation-linked at 2.0% real, plus a 4.0% expected reference rate and 2.6% inflation, inflation-linked comes first with $55,700 after a 22% tax, only $67 ahead of the fixed rate. Breakeven inflation is 2.55%, just below your 2.6% forecast, and the breakeven reference rate is 4.60%, above your 4.0%, so floating comes last.

What is breakeven inflation?

The inflation rate at which a fixed-rate bond and an inflation-linked bond of the same term pay the same: (1 + fixed rate) ÷ (1 + real rate) − 1. If inflation ends up higher, inflation-linked wins; if lower, fixed wins.

Where do I get the expected reference rate and inflation?

Central banks publish projections and policy statements, and government bond yields show what the market expects. Use the average you expect over the whole term, not just today’s value. The rates offered come from your bank, broker or the government bond website.

How are taxes handled?

The calculator applies the single tax rate you type to the gain at the end of the term, or no tax if you choose tax-exempt. Real tax rules vary by country, account type and income; some bonds are exempt at certain levels. Check with a tax professional.

What are the limits of this calculator?

Rates and inflation are constant averages, compounding is yearly and bonds are held to maturity. It ignores price changes if you sell early, issuer credit risk, deposit insurance limits and fees.

When should I talk to a professional?

When the amount is large, the term is long or the money has a specific goal such as retirement or a home purchase. A fee-only financial planner can weigh credit risk, liquidity, taxes and how to split money among the three types.

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Fixed, floating or inflation-linked: how to choose

Fixed-income investments pay you in one of three ways. A fixed rate locks in the return on the day you invest. A floating rate pays a percentage of a reference rate (such as the central bank policy rate) and changes as rates change. An inflation-linked bond pays inflation plus a fixed real rate. None of them is always better: the winner depends on what happens to interest rates and inflation during the term.

Breakeven inflation

Comparing a fixed rate with the real rate of an inflation-linked bond of the same term gives the inflation the market is pricing in: (1 + fixed rate) ÷ (1 + real rate) − 1. With a 4.6% fixed rate and a 2.0% real rate, breakeven inflation is about 2.55% a year. If you expect inflation above that, the inflation-linked bond should pay more; below it, the fixed rate wins.

Breakeven reference rate

For floating rates, the question is the average reference rate over the term. If the floating option pays 100% of the reference rate, it only beats a 4.6% fixed rate if the reference rate averages more than 4.6%. If you think rates will fall, the fixed rate is attractive; if you think they will rise, or prefer not to bet, floating is safer.

Taxes and tax-free equivalents

Interest is usually taxed as income, but some bonds and accounts are tax-exempt. To compare, divide the tax-free rate by (1 − your tax rate): a tax-free 3.5% equals a taxable 4.49% for someone in a 22% bracket. The calculator applies the tax rate you type to the gain at the end of the term.

Price changes before maturity

Fixed-rate and inflation-linked bonds only deliver the contracted rate if held to maturity. Sold earlier, their price depends on market rates that day, and can be higher or lower. Floating-rate investments barely move in price. A common approach is to split the money among the three types so you do not depend on a single forecast.