nominal interest rate

(redirected from Nominal Rates of Interest)
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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 ?
In general, in the third and fourth sub-sample periods, nominal rates of interest, inflation and monetary growth rates reached average levels that were significantly below earlier peak levels, in all countries.
Only as they became convinced of sustained, lower rates of inflation, did they build these into lowered, expected rates of inflation and lower nominal rates of interest.
1985^ to generate a precautionary demand for cash balances, a demand exemplified by the possible coexistence of positive nominal rates of interest and a slack cash constraint on consumption purchases.
1970^ conclusion that if the primary disturbances to the economy are money demand shocks, then the optimal policy is to smooth nominal rates of interest.