Definition:Nominal Rate of Interest

Definition

Let $I$ be an interest rate calculated over time period of less than a year.

The nominal rate is the interest rate stated for the year by multiplying the interest rate by the number of time periods in the year.

Examples

Arbitrary Example

Let $\pounds 1000$ be invested for $2$ years at $8 \%$ per annum.

Let interest be compounded half-yearly.

The interest rate $8 \%$ per annum is a nominal rate of interest.

Also see

• Results about nominal rates of interest can be found here.

Sources

• 1998: David Nelson: The Penguin Dictionary of Mathematics (2nd ed.) ... (previous) ... (next): interest
• 2008: David Nelson: The Penguin Dictionary of Mathematics (4th ed.) ... (previous) ... (next): interest