Nominal interest rates

The actual interest rate without any adjustments. Usually, annual interest payable divided by face value.

The nominal interest rates are used in most financial calculations, but it is often useful to think in terms of real interest rates.

Because there is a correlation between (nominal) interest rates and inflation real interest rates, real rates may be more stable and predictable when considering long term floating interest rates, especially for financial modeling.

Real rates, are of course, known with certainty for some period of time when dealing with a particular investment with a fixed interest rate, and they may be more predictable in the short term in any case.

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