nominal interest rate

(redirected from Nominal Rate of Interest)

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 ?
Bajaj Finserv extends financing of up to Rs 32 lakh to doctors at a nominal rate of interest, on a collateral-free basis, so that doctors can grow their business from strength to strength.
These global lending agencies provide loans on nominal rate of interest to Pakistan as compared with high interest bearing Chinese loans.
Nominal rate of interest: Also known as the advertised rate of interest, this is the interest rate that is used to calculate the interest payment on your loan.
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 common central bank decides on a nominal rate of interest under its direct control (for instance, the rate at which it lends money to private banks) and can influence the linked goods markets in the union in this way.
In order to keep the real return on financial and real assets constant, the nominal rate of interest must adjust to the expected rate of inflation.
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 1.25 per cent.
Longer-term inflation expectations are reflected in the differential between the nominal rate of interest on bonds and the rate of interest on an index-linked bond with approximately the same maturity.
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).