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The annual nominal rate of interest on a bank certificate of deposit is 12 percent what would be the effect of an inflation rate of 13 percent?
Wiki User
∙ 10y ago
The 12 percent nominal interest means that your money will increase in value by 12% in a year's time in NOMINAL terms.
However, the inflation rate of 13 percent says that the cost of goods will increase faster than the value of your deposit.
Hence the REAL effect is that the value of your money will fall by 1 percent.
Wiki User
∙ 10y ago
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If you save one dollar on January 1 two dollars on January 2 three dollars on January 3 and continue this pattern for one year what will be the value of your entire savings?
In a normal year with 365 days, you would have $66,795 at the end of the year. If you were saving in a leap year, you would have $67,161. If you really want to get into "value", you would have to consider inflation/deflation rates (normally around 3% in the US) and decide with what time you want to compare it. In addition, are you investing it in savings or just putting it in a shoebox. If investing it you need to know the interest rate and when interest is compounded (daily , monthly, quarterly, etc) in which case you can calculate nominal interest = Invested amount at time interest calculated * interest rate /period (period being 365.25 for daily 12 for monthly etc.) If you want real interest rate (or value factoring in inflation) real interest = Invested amount at time interest calculated *(interest rate- inflation rate) /period. I am sorry if that actually answered more than what you wanted.
What is nominal value?
A nominal number names something-a telephone number, a player on a team. Nominal numbers do not show quantity or rank. They are used only to identify something.Here are some examples using nominal numbers:jersey number 4zip code 02116
What are nominal values?
Nominal values are the values that a component is specified to be. For example, the nominal value of a 10K resistor is 10K. Its actual value may vary, though, based on its tolerance.
What is the difference between Nominal ordinal and interval ratio?
intervals in degrees, nominal gender, ratio speed, ordinal grading
What is true size?
it is the nominal size?
What is nominal interest?
Nominal InterestA nominal interest rate is the interest rate that does not compensate for inflation. This is used in relation to "effective interest rate" or "real interest rate."" Real Interest Rate = Nominal Interest Rate - Inflation Rate " Improvement suggested by Palash Bagchi.
What is the best nominal interest rate?
Nominal interest rate referes to the rate of interest prior to taking inflation into account. Depending on its application, an inflation and risk premium must be added to the real interest rate in order to obtain the best nominal rate.
What happens if inflation rises by just 1 percent?
The dollar in your pocket is worth .99 of a dollar. also nominal interest=real interest+inflation so nominal interest goes up by 1%
What does the nominal interest rate mean?
A nominal interest rate is an interest rate that does not factor in the rate on inflation. Nominal interest rate could also refer to an interest rate that does not adjust for the full effect of compounding.
What does nominal interest rates means?
A nominal interest rate is an interest rate that does not factor in the rate on inflation. Nominal interest rate could also refer to an interest rate that does not adjust for the full effect of compounding.
Suppose a borrower and lender agree on the nominal interest rate to be paid on a loan and the inflation turns out to be higher than they expected Is the real interest rate on this loan higher?
the real interest rate equals nominal interest rate minus inflation rate. In the situation the inflation rate increase and the nominal interest rate remains unchanged, therefore the real interest rate must decrease.
How do you calculate nominal interest rate?
Nominal interest, is the amount of interest on a loan or investment that does not take into account inflation; it's the amount of interest listed on the loan or bond.
You nominal rate the same as true rate?
No. Nominal interest rate is the rate before adjustments for inflation.
What is nominal interest rate minus the expected rate of inflation?
The expected real interest rate.
The one year nominal interest rate is 7.97 and the real interest rate is 3.54 what is the expected inflation rate?
The expected inflation rate is 11.51%
How does the real interest rate relate to the nominal interest rate?
A real interest rate and a nominal interest rate are quite similar. The only real difference between the two interest rates are that a nominal interest rate include the cost of inflation where as the real interest rate does not.
What does a lower interest rate mean for savers?
It means that they are getting less money for deferring expenditure and saving instead. However, it is not the low nominal interest rates which matter but what the "real" interest rates are. This is the difference between the nominal interest rate and the rate of inflation. An interest rate of 2% when inflation is 0% is good news for savers but an inflation rate even as high as 10% is bad news if inflation is higher than 10%.
