What is NOMINAL RATE OF INTEREST?

1. Bank deposits: The stated rate of interest on deposits that is expressed in terms of current dollar, which does not take the effects of inflation and compounding into effect. It is also referred to as the nominal rate of return or nominal interest rate. After adjusting for inflation and compounding, the adjusted rate is called the real rate of interest. 2. Bank Loans: The Interest rate that is specified to be paid on a loan. This is less that the effective rate that is applied on the entire interest amount which is deducted on the release of the loan. 3. Securities: The Interest rate that is quoted on the face and body of a security. It is computed on its par value and not the market value. It is also known as nominal yield

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