Nominal

AAA

DEFINITION of 'Nominal'

An unadjusted rate, value or change in value. This type of measure often reflects the current situation, such as the current price of a car, and doesn't make adjustments to reflect factors such as seasonality or inflation, which provide a more accurate measure in real terms.

INVESTOPEDIA EXPLAINS 'Nominal'

In most cases, value is measured in real terms rather than nominal terms, which make adjustments to give a more accurate measure.

For example, if you buy a $900 bond and are paid $1,000 for it a year later, your rate of return is 11.1%. This is the nominal rate of return; it is unadjusted and reflects the return on your bond. However, to get a more accurate picture of the actual return, the rate needs to be adjusted for inflation because the purchasing power of the your money has likely changed over the one-year period. Therefore, if inflation for that year is 5%, the real rate of return is only 6.1% (11.1%-5%).

RELATED TERMS
  1. Nominal Interest Rate

    The interest rate before taking inflation into account. The equation ...
  2. For Valuation Only - FVO

    A notation placed in front of a security's price quote denoting ...
  3. Nominal Value

    The stated value of an issued security. Nominal value in economics ...
  4. Nominal Yield

    The coupon rate on a bond. The nominal yield is the interest ...
  5. Nominal Quotation

    A quote generated by a futures exchange or broker for contracts ...
  6. Inflation-Adjusted Return

    A measure of return that accounts for the return period's inflation ...
Related Articles
  1. Retirement

    Combating Retirement's Silent Killer: Inflation

    Inflation can devour a once secure nest egg. Learn how to protect yours.
  2. Economics

    Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.
  3. Options & Futures

    Introduction To Inflation-Protected Securities

    Inflation is an enemy to investors - except to those who invest in IPS, which guarantee a real rate of return with no credit risk.
  4. Economics

    The Importance Of Inflation And GDP

    Learn the underlying theories behind these concepts and what they can mean for your portfolio.
  5. Retirement

    Inflation-Protected Annuities: Part Of A Solid Financial Plan

    If you worry about inflation and longevity risks, this may be the investment for you.
  6. Investing Basics

    What is the difference between macroeconomics and finance?

    Dive into the world of economics by learning the key differences between macroeconomics and finance. These ideas help investors make good choices.
  7. Economics

    How successful is fiscal policy in guiding the national economy?

    See why it is difficult to evaluate the impact of fiscal policy on the national economy and how fiscal tools have failed to live up to expectations.
  8. Economics

    What do Keynes and Freidman have to do with fiscal and monetary policy?

    Find out how John Maynard Keynes and Milton Friedman influenced how modern economists and analysts think about fiscal and monetary policy.
  9. Economics

    What is the role of deficit spending in fiscal policy?

    Read about the role deficit spending can play in a government's fiscal policy, and learn why economists are torn about the efficacy of debt-related stimulus.
  10. Economics

    Who sets fiscal policy, the president or congress?

    Discover how fiscal policy is set in the United States, including how all three branches of government can affect a given policy proposal.

You May Also Like

Hot Definitions
  1. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  2. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  3. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  4. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  5. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  6. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
Trading Center