This posting addresses nominal and real interest rates.
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Please define, in layman's terms, both nominal and real interest rates. Next, please explain the difference between nominal and real interest rates.
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The solution provides a discussion on nominal and real interest rates. References are also provided.
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A nominal interest rate is the rate of interest before considering any form of inflation. It is the interest rate that is unadjusted thus far for inflation, and is usually the interest rate that is quoted most commonly by financial investors and analysts as the interest rate of an asset. The real interest rate is the sum of the nominal interest rate less the rate of inflation. The appropriate rate of inflation is taken out of the ...
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