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 ?
Do nominal rates of interest change with inflation expectations, changes in expected real rates of interest or both?
In general, there is evidence of a potentially greater role played by the real rate of interest in explaining the significantly higher average nominal rates of interest observed during the second sub-sample period.
We did note some inflation rate sensitivity, but, during the period of study, we were unable to find appreciable sensitivity to nominal rates of interest, perhaps because of the pattern of decreasing inflation was offset somewhat by the increasing real rates that transpired during the period.
1) These liquidity models are something of a growth industry, partly because they are potentially consistent with a monetary equilibrium in which monetary injections drive down nominal rates of interest and stimulate real activity--stylized facts supported by evidence presented in, for example, Christiano and Eichenbaum