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What is the nominal, or stated, interest rate?

April 26, 2017Interest rate nominal

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What is the nominal, or stated, interest rate?

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Posted

The nominal interest rate is the stated interest rate. It should be distinguished between the real rate and the effective rate. The nominal rate is the real interest rate plus the inflation rate. To determine an effective rate, you must adjust the nominal rate to reflect compounding periods and any interest add-on. Read the fine print to find out what you are actually paying or receiving. It most likely is not the nominal (stated) rate. See also real interest rate and effective interest rate.