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 ?
House prices reflect nominal interest rates as well as real interest rates.
Those of you who have followed my commentary during 2015 know that I have been an advocate of ending the Federal Open Market Committee's (FOMC's) near-zero nominal interest rate policy.
A more sophisticated argument against Joan Robinson's claim would be that nominal interest rates don't matter, and that real interest rates are the proper measure of the stance of monetary policy.
We use five- and ten-year government bonds to estimate the longer-term nominal interest rate, which we then adjust for expected inflation using estimates from a model developed by the Federal Reserve Bank of Cleveland.
In fact, Japanese savers have been benefiting from this phenomenon for more than a decade, reaping higher real returns than their counterparts in the US, even though Japan's near-zero nominal interest rates are much lower than America's.
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 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.
And, because people trade bonds for commodities, cash, and stocks, the prices of government debt are the rate of inflation, the nominal interest rate, and the level of the stock market.
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.
He demanded the central government to immediately come out with a categorical policy on weavers to create a sense of confidence among them and give them the top priority in matters like providing loans, either interest free or on nominal interest rate and providing social security net.