The nominal interest rate is the rate of return on an investment that is unadjusted for the effect of inflation. It is distinguished from the real rate, which is the nominal rate less the rate of inflation.
The nominal loan rate, also known as the face interest rate, is the interest rate stated on a loan agreement or financial instrument without adjusting for inflation or other factors that could affect the real cost of borrowing.
The real interest rate is the nominal interest rate adjusted for inflation. It represents the true cost of borrowing and the real yield on investments.
