nominal interest rate

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Nominal interest rate

The interest rate unadjusted for inflation.

Nominal Interest Rate

The interest rate on an investment or loan without adjusting for inflation. The nominal interest rate is simply the interest rate stated on the loan or investment agreement. If one makes a loan at a high nominal interest rate, this does not guarantee a real profit. For example, if the nominal interest rate on a loan is 7% and the inflation rate is 4%, the real interest rate is only 3%.

nominal interest rate

The stated rate of interest, exclusive of any compounding, that is paid on an investment. Annual interest of $80 on a $1,000 investment is a nominal rate of 8% whether the interest is paid in $20 quarterly installments, in $40 semiannual installments, or in an $80 annual payment. Use of nominal rates can be misleading when comparing returns from different investments. See also effective rate of interest.

nominal interest rate

the INTEREST RATE paid on a LOAN without making any adjustment for the effects of INFLATION. Contrast REAL INTEREST RATE.

nominal interest rate

The stated interest rate in a note, which may differ from the true (effective) interest rate because of discounting or fees.

References in periodicals archive ?
Equation 2 is a portfolio equilibrium condition or LM curve that states real money balances demanded increase as output demanded increases and as the nominal rate of interest decreases.
What is needed for such a policy is simply that the nominal rate of interest be set equal to a constant inflation rate, [bar.
In particular the focus is on changes in the money supply growth rate, [sigma], or more simply in the nominal rate of interest because this is given by R - [sigma] + [rho] + [rho][sigma].
32) Therefore, we determined that there was no need to adjust the nominal rate of interest further and were satisfied that a discount rate of 3.
Under this rule, the central bank responds only to readily available information when adjusting the nominal rate of interest.
The model adopted here regards the long-term nominal rate of interest as being determined by a loanable funds equilibrium of the following form:
An exogenous, persistent, upward shock in the growth rate of the monetary base engineered by the central bank and not associated with any current or prospective adjustment in distortionary taxes, drives the nominal rate of interest rate down for a significant period of time.
If the real cost of capital to the firm has not changed, then the lower nominal rate of interest should exactly balance the lower rate of increase expected in product prices.
In the face of binding usury laws limiting the nominal rate of interest charged on loans, the revenue maximizing rate of inflation is lower than in the unconstrained case.
Following Frenkel and Rodriguez [1982] let y, p, m denote natural logarithms of aggregate output, the price level, and the money supply, respectively, and let i represent the nominal rate of interest.
Let R(T) be the riskless nominal rate of interest on a default-free zero coupon bond of the conventional kind (e.
An attempt to conduct monetary policy by permanently lowering the nominal rate of interest could eventually lead to an unstable path for real output and prices.