Tag: Nominal Interest Rate

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Nominal interest rate is the rate of interest expressed as a percentage of the amount of money borrowed or lent. It is used to calculate annual interest payments on loans and investments. It is the rate of interest expressed in monetary terms without considering payments already made or due and without considering the effects of inflation. Furthermore, the nominal interest rate is the quoted rate and does not account for compounding of interest which can create an effective rate that is higher than the nominal rate.

Formula

Nominal Interest Rate Formula: An Overview of Academic Research

Nominal Interest Rate Formula: An Overview of Academic Research
5 min read

The nominal interest rate formula (IRF) in Forex trading is a calculation used to determine the amount of interest rate charged or earned on a given foreign currency pair. This calculation takes into account the quoted interest rate of the two countries involved in the currency pair, the spot exchange rate for the currency pair, and the amount of time since the position was opened. The IRF formula is important for getting an understanding of the true value of a position, as different currencies can have different interest rates, depending on the country they are issued in. By using the IRF formula, traders can accurately assess the true cost of a position in a given currency pair.