The formula to calculate the Nominal Interest Rate is:
\[ \text{Nominal Interest Rate} = \text{Compounding Periods} \times \left( (1 + \text{Effective Interest Rate})^{\frac{1}{\text{Compounding Periods}}} - 1 \right) \]
Where:
The Nominal Interest Rate or Stated Rate refers to the interest rate before taking inflation into account.
Let's assume the following values:
Using the formula:
\[ \text{Nominal Interest Rate} = 10 \times \left( (1 + 6)^{\frac{1}{10}} - 1 \right) \]
Evaluating:
\[ \text{Nominal Interest Rate} = 10 \times (1.6 - 1) \]
\[ \text{Nominal Interest Rate} = 10 \times 0.6 \]
\[ \text{Nominal Interest Rate} = 6 \]
The Nominal Interest Rate is 6%.
| Compounding Periods | Effective Interest Rate (%) | Nominal Interest Rate (%) |
|---|---|---|
| 1 | 1 | 0.010000000000 |
| 1 | 2 | 0.020000000000 |
| 1 | 3 | 0.030000000000 |
| 1 | 4 | 0.040000000000 |
| 1 | 5 | 0.050000000000 |
| 1 | 6 | 0.060000000000 |
| 1 | 7 | 0.070000000000 |
| 1 | 8 | 0.080000000000 |
| 1 | 9 | 0.090000000000 |
| 1 | 10 | 0.100000000000 |
| 2 | 1 | 0.009975124224 |
| 2 | 2 | 0.019900987672 |
| 2 | 3 | 0.029778313018 |
| 2 | 4 | 0.039607805437 |
| 2 | 5 | 0.049390153192 |
| 2 | 6 | 0.059126028197 |
| 2 | 7 | 0.068816086558 |
| 2 | 8 | 0.078460969083 |
| 2 | 9 | 0.088061301782 |
| 2 | 10 | 0.097617696340 |
| 3 | 1 | 0.009966850626 |
| 3 | 2 | 0.019868128680 |
| 3 | 3 | 0.029704902150 |
| 3 | 4 | 0.039478211461 |
| 3 | 5 | 0.049189070445 |
| 3 | 6 | 0.058838467267 |
| 3 | 7 | 0.068427365309 |
| 3 | 8 | 0.077956704018 |
| 3 | 9 | 0.087427399715 |
| 3 | 10 | 0.096840346369 |
| 4 | 1 | 0.009962717257 |
| 4 | 2 | 0.019851726293 |
| 4 | 3 | 0.029668287111 |
| 4 | 4 | 0.039413626196 |
| 4 | 5 | 0.049088937716 |
| 4 | 6 | 0.058695384675 |
| 4 | 7 | 0.068234100007 |
| 4 | 8 | 0.077706187633 |
| 4 | 9 | 0.087112723459 |
| 4 | 10 | 0.096454756338 |
| 5 | 1 | 0.009960238333 |
| 5 | 2 | 0.019841893522 |
| 5 | 3 | 0.029646346950 |
| 5 | 4 | 0.039374942589 |
| 5 | 5 | 0.049028988367 |
| 5 | 6 | 0.058609757464 |
| 5 | 7 | 0.068118489553 |
| 5 | 8 | 0.077556391987 |
| 5 | 9 | 0.086924640935 |
| 5 | 10 | 0.096224382457 |
| 6 | 1 | 0.009958586173 |
| 6 | 2 | 0.019835341948 |
| 6 | 3 | 0.029631732187 |
| 6 | 4 | 0.039349181619 |
| 6 | 5 | 0.048989076311 |
| 6 | 6 | 0.058552765075 |
| 6 | 7 | 0.068041560809 |
| 6 | 8 | 0.077456741781 |
| 6 | 9 | 0.086799552850 |
| 6 | 10 | 0.096071206640 |
| 7 | 1 | 0.009957406283 |
| 7 | 2 | 0.019830664017 |
| 7 | 3 | 0.029621298949 |
| 7 | 4 | 0.039330794676 |
| 7 | 5 | 0.048960594201 |
| 7 | 6 | 0.058512101422 |
| 7 | 7 | 0.067986682546 |
| 7 | 8 | 0.077385667446 |
| 7 | 9 | 0.086710350947 |
| 7 | 10 | 0.095961994068 |
| 8 | 1 | 0.009956521487 |
| 8 | 2 | 0.019827156534 |
| 8 | 3 | 0.029613477234 |
| 8 | 4 | 0.039317011981 |
| 8 | 5 | 0.048939247097 |
| 8 | 6 | 0.058481628371 |
| 8 | 7 | 0.067945562540 |
| 8 | 8 | 0.077332418697 |
| 8 | 9 | 0.086643529632 |
| 8 | 10 | 0.095880193123 |
| 9 | 1 | 0.009955833386 |
| 9 | 2 | 0.019824429064 |
| 9 | 3 | 0.029607395581 |
| 9 | 4 | 0.039306296558 |
| 9 | 5 | 0.048922652369 |
| 9 | 6 | 0.058457941728 |
| 9 | 7 | 0.067913603220 |
| 9 | 8 | 0.077291036746 |
| 9 | 9 | 0.086591604915 |
| 9 | 10 | 0.095816634368 |
| 10 | 1 | 0.009955282950 |
| 10 | 2 | 0.019822247447 |
| 10 | 3 | 0.029602531457 |
| 10 | 4 | 0.039297727022 |
| 10 | 5 | 0.048909381985 |
| 10 | 6 | 0.058439001618 |
| 10 | 7 | 0.067888050185 |
| 10 | 8 | 0.077257952427 |
| 10 | 9 | 0.086550094988 |
| 10 | 10 | 0.095765827769 |
| 11 | 1 | 0.009954832623 |
| 11 | 2 | 0.019820462727 |
| 11 | 3 | 0.029598552511 |
| 11 | 4 | 0.039290717435 |
| 11 | 5 | 0.048898527967 |
| 11 | 6 | 0.058423511247 |
| 11 | 7 | 0.067867152684 |
| 11 | 8 | 0.077230897472 |
| 11 | 9 | 0.086516152038 |
| 11 | 10 | 0.095724285426 |
| 12 | 1 | 0.009954457372 |
| 12 | 2 | 0.019818975623 |
| 12 | 3 | 0.029595237268 |
| 12 | 4 | 0.039284877386 |
| 12 | 5 | 0.048889485404 |
| 12 | 6 | 0.058410606784 |
| 12 | 7 | 0.067849744649 |
| 12 | 8 | 0.077208361320 |
| 12 | 9 | 0.086487879794 |
| 12 | 10 | 0.095689685147 |