What is nominal rate? Nominal rates are just interest rates that leave out certain figures. Typically, these figures are things like inflation or fees charged by a loan issuer. If nominal rates are advertised, investors need to take into account the inflation that’s expected over the period of their investment or loan to get a realistic idea of what will be made or paid.
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but when the bond was sold it was actually somewhat better than lukewarm
or almost hot offering and it sold for a hundred five cents on the dollar or a
five percent premium to the nominal rate. so investors did not in fact receive the [woman holds bond]
nominal rate because they paid slightly more than the thousand dollars our value
of the bond. they paid a thousand fifty. so instead they received eleven point
seven five divided by 1.05 or about eleven point two percent in interest.
that was the real return they got. the 11 and three-quarters percent? yeah that's [equation shown]
the nominal. rate the named rate and the performance of the bond well, it was not
phenomenal. [graph shows bankruptcy]