nominal interest rate


Also found in: Medical, Wikipedia.

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 ?
Most central banks adjust their interest rate in a manner consistent with the so-called Taylor rule--an interest rate rule (IRR) that specifies by how much the monetary authority increases (decreases) the short-term nominal interest rate when inflation is above (below) the target or the output gap is positive (negative).
The real 10-yr treasury rate, which is the nominal interest rate minus the rate of inflation, was 0.
A very low -- or even negative -- nominal interest rate could produce a positive real return for a saver, if prices fall sufficiently.
The loans have an average weighted nominal interest rate of around 1.
Thus, the nominal interest rate for lending will be no more than 6% per year, loan term will take up to 10 years, Loan currency - tenge, the grace period for payment - 24 months.
This type of bond has no nominal interest rate and is issued at a price lower than the par value and repays the principle at the par value upon maturity.
Prior to Ireland's entry to the Eurozone, its nominal interest rate was an equilibrating force set endogenously in its economy and subject to influence by its national central bank.
This means that the nominal interest rate can be separated into the real rate plus the expected inflation rate, In other words, if investors hope to get a real return of 3 percent on what they lend, and they expect inflation to be 2 percent, they charge 5 percent interest.
This study attempts to contribute to the existing literature by examining whether there exists a long-run equilibrium relationship between money demand and its major determinants; real income, nominal interest rate, and nominal exchange rate.
Regarding monetary policy, a negative relation is observed between nominal interest rate and GDP gap, which shows that the monetary authorities adopt pro-cyclical stance due to presence of weak institutions [Duncan (2012)].
Only when the nominal interest rate is lowered within single digits does local currency financing become much more viable.
Bullard discussed a simple economic model, in which the monetary authority controls a short-term nominal interest rate and uses a Taylor-type policy rule to describe the interest rate decisions.