What's a Nominal Rate?
In Finance and Economics, the Nominal Interest Rate or Nominal Rate of Interest Is Either of Two Distinct Things: the Rate of Interest Before Adjustment for...
In finance and economics, the nominal interest rate or nominal rate of interest is either of two distinct things: the rate of interest before adjustment for inflation; or, for interest rates "as stated" without adjustment for the full effect of compounding.
What is a nominal rate?
Nominal interest rate refers to the interest rate before taking inflation into account. Nominal can also refer to the advertised or stated interest rate on a loan, without taking into account any fees or compounding of interest.
What is nominal rate and real rate?
A real interest rate is an interest rate that has been adjusted to remove the effects of inflation to reflect the real cost of funds to the borrower and the real yield to the lender or to an investor. A nominal interest rate refers to the interest rate before taking inflation into account.
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