Investopedia

Nominal Interest Rate

Dictionary Says

Definition of 'Nominal Interest Rate'

Nominal interest rate refers to the rate of interest prior to taking inflation into account. Depending on its application, an inflation and risk premium must be added to the real interest rate in order to obtain the nominal rate.
Investopedia Says

Investopedia explains 'Nominal Interest Rate'

Nominal Interest Rate = Real Interest Rate + Inflation Premium + Risk Premium


In practice, the inflation premium is often assumed to be the expected inflation rate and the risk premium is ignored. Unless the economy is experiencing a deflationary period, the nominal rate will be higher than the real rate.

Articles Of Interest

  1. The Real Cost Of An MBA

    When adding up tuition, books, rent and foregone salary, an MBA can cost as much as a house. Is it worth it?
  2. Financial Designations That Employers Require

    We break down the designations that are important to have if you want to work in the financial sector.
  3. Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.
  4. Predict Inflation With The Producer Price Index

    Find out how the PPI can be used to gauge the overall health of the economy.
  5. Should You Get A CFA, MBA Or Both?

    These certifications require time and money, but combined programs are making obtaining both designations more realistic.
  6. Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.
  7. Pass Your CFA Exams On The First Try

    Become one of the elite who pass these exams by using these simple study methods.
  8. Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.
  9. Austerity: When The Government Tightens Its Belt

    When a government tightens its belt in tough economic times the entire nation feels the squeeze.
  10. Will Quantitative Easing Be Japan's Savior?

    The quantitative easing program, recently announced by the new governor of the Bank of Japan, Haruhiko Kuroda, is for a cash infusion of $1.4 trillion by the end of 2014. Will it help the Japanese ...
comments powered by Disqus
Marketplace
Hot Definitions
  1. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.
  2. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.
  3. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.
  4. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.
  5. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
  6. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.
Trading Center