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 ?
Schemes such as Millionaire Destiny Savings Account and Ghina Savings Account offer a nominal rate of interest along with a chance to win a million dirhams.
The real rate of bank deposits has also turned negative since inflation has been higher than the current nominal rate of interest for four consecutive months.
At its pounds 100 face value this stock's "coupon" or nominal rate of interest is a slim 1.
Most pay only a nominal rate of interest, cancelled out in many cases by charges or fees.
Suppose the monetary authority pegs the nominal rate of interest for the duration of the period in question.
In line with that example, a consequence of the interest rate rule is that the short-run "leaning against" fluctuations in the nominal rate of interest leads to greater medium-term volatility in inflation and the nominal rate, which is related to concerns expressed by Friedman (1968) and Poole (1978).
The competitive bank discounts the nominal profit stream by the nominal rate of interest, and maximizes the time 0 discounted stream, denoted by [[?
Standard macroeconomic theory states that consumers are induced to put off present consumption on the basis of the nominal rate of interest [Barro (1990)].
7) Thus, our specific assumption is that the nominal rate of interest is known but the real interest rates for each good are unknown because absolute price changes are unknown.
Under this rule, the central bank responds only to readily available information when adjusting the nominal rate of interest.
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.