Nominal Rates

"Nominal interest rate refers to the interest rate before taking inflation into account. Nominal can also refer to the advertised or stated interest rate on a loan, without taking into account any fees or compounding of interest. The nominal interest rate formula can be calculated as: r = m × [ ( 1 + i)1/m - 1 ]. Where: i=the effective rate r=the stated rate m=the number of compounding periods
Finally, the federal funds rate, the interest rate set by the Federal Reserve, can also be referred to as a nominal rate."


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