Nominal value is the face value of a consumer good or service. Real values compare the values of different goods and services or provide values that account for changes in value due to inflation. For example, a loaf of bread may have a nominal value of $2 and a real value of a bag of apples. The nominal value is expressed using a currency, and the real value is expressed using other goods. Real values are relative to the costs of other goods and services and may change more quickly than nominal values. A changing real value with a consistent nominal value may mean that inflation is not impacting the price of that item as much as another. The nominal value of a security is sometimes identical to the real value.

Nominal values are not as accurate as real values and do not reflect the latest market information. Real values often fluctuate more rapidly and are very sensitive to market conditions and supply and demand. With securities, many different real values apply when comparing one security with others. The nominal value may change to reflect these changes, but this is usually a gradual process that is not as responsive. Sometimes, the nominal value remains the same while the real price decreases dramatically. For example, a stock may have a nominal value of $100 that remains the same for 10 years. It has the same sticker price, but inflation reduces the value of the $100 and makes the security relatively cheaper when compared with other investments.

  1. How does the Fisher effect illustrate returns on bonds?

    Learn how the Fisher effect shows the impact of expected future increases in inflation on the prices of bonds and their interest ... Read Answer >>
  2. How much of an economy's performance is captured by real GPD?

    Learn about the economic information captured by real GDP. Find out how real and nominal GDP are constructed and the purposes ... Read Answer >>
  3. What does the Fisher Effect say about nominal interest rates?

    Read about what economists call the Fisher effect, which states that real interest rates are equal to nominal rates minus ... Read Answer >>
  4. Is real GDP a better index of economic performance than GDP?

    Learn why real GDP is a better index for expressing the output of an economy, as it takes into account the factors that distort ... Read Answer >>
  5. What are some alternatives to real GDP?

    Learn about economic measures used instead of real GDP and the limitations of real GDP. Find out in which situations nominal ... Read Answer >>
  6. What is the difference between book value and market value

    Learn the differences between book value and market value, and see how investors use each type to determine if a company ... Read Answer >>
Related Articles
  1. Investing

    Interest Rates Explained: Nominal, Real, Effective

    Interest rates are divided into subcategories. Smart investors look beyond the nominal or coupon rate of a bond or loan to see if it fits their objectives.
  2. Investing

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.
  3. Investing

    Introduction to Treasury Inflation-Protected Securities (TIPS)

    Learn more about U.S. Treasury Inflation Protected Securities (TIPS) – one way to protect your portfolio from inflation.
  4. Investing

    Investment Value Vs. Fair Market Value: How They Differ

    Learn about the differences between an asset's investment value and its fair market value, including why many think fair market value is unrealistic.
  5. Trading

    The International Fisher Effect: An Introduction

    The Fisher models have the ability to illustrate the expected relationship between interest rates, inflation and exchange rates.
  6. Investing

    Does Active Value Investing Pay Off?

    Learn about a well-researched paper that explores why active value investors underperform, and how value investing might be beneficial for your portfolio.
  7. Investing

    How Value Investors’ Patience Has Been Tested

    Investors in value stocks are finding their patience tested. Does this strategy still work?
  8. Insights

    Will You See Higher Wages In 2015?

    It's been a few years into the economic recovery from the Great Recession, and the employment picture has been rocky.
  1. Nominal

    An unadjusted rate, value or change in value. This type of measure ...
  2. Nominal Quotation

    A quote generated by a futures exchange or broker for contracts ...
  3. Real Interest Rate

    An interest rate that has been adjusted to remove the effects ...
  4. Nominated Advisor - NOMAD

    A company that has been approved as a nominated advisor for the ...
  5. Nomination Committee

    A nomination committee is a committee that acts as part of an ...
  6. Face Value

    Face value is the nominal value or dollar value of a security ...
Hot Definitions
  1. Liquidity

    Liquidity is the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's ...
  2. Federal Funds Rate

    The federal funds rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve ...
  3. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  4. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  5. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  6. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
Trading Center