Definition: The stated interest rate before adjustments needed to express an effective annual rate or the effect of inflation, depending on the context.
Example
A stated annual rate of 12% compounded monthly has a monthly periodic rate of 1%, while its effective annual rate is higher.
Keep the distinction clear
Nominal, effective, real, and annual percentage rates answer different questions. Identify the convention used in the problem.
Related terms
Interest · Annual Percentage Rate (APR) · Yield
Keep studying
References: California DRE: glossary
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