Interest Rates: Nominal and Real

Loading the player...

Interest rates are the primary yardstick for measuring how much return lenders will get. However, the stated interest rate on a loan, sometimes called the nominal rate, doesn’t tell the whole story.
 
Because of inflation, the purchasing power of every dollar lent out to an individual or a business tends to decrease over time. Lenders take this into account by calculating what’s known as the real interest rate.
 
 

You May Also Like

Related Articles
  1. Economics

    Open Market Operations Explained

  2. Credit & Loans

    How Line of Credit Works

  3. Investing

    Quantitative Easing

  4. Budgeting

    Explaining Underwater Loans

  5. Investing

    Introduction To Bonds

  6. Economics

    What Is Inflation?

  7. Term

    Penalty Repricing

Trading Center