In the world of finance, many different indicators are used that are necessary to have an idea of the state of affairs. Some talk about them rather superficially. Others - in more detail and detail. Under the article, the nominal interest rate will be affected. What is it, why is it necessary, about which, knowing about it, you can judge - you will learn all this by reading the article.
What is called the nominal interest rate
It is understood as a certain amount, which is indicated in percentage terms relative to the size of the loan, deposit or parts thereof, which will need to be paid in the future for use when calculating for certain periods (or received). This is the usual “banking” look. If we consider this situation from the point of view of the theory of money, then the interest rate refers to the price of money as a means of saving. Also, this concept can be used to refer to interest income, which is the amount of profit received from the provision of capital or investment. But the nominal interest rate allows only the indicators to be judged. How much will everything change in practice? After all, the nominal interest rate is equal to the value from which inflation is not calculated (much less often - deflation). We will talk about such features now.
How to understand how the nominal rate corresponds to the real state of affairs
Suppose there is such a situation: you are the owner of 10 thousand rubles and decided to put them in the bank at 10% per annum. By carrying out the simplest mathematical manipulations, it is possible to calculate that in a year you will have 11,000. But can you buy from them the same as before? We introduce additional parameters: the money was needed to buy certain goods that used to cost 5 thousand rubles. But in a year they will already cost 5205. Then you can already calculate that your profit will be less than 600 rubles. And if the price increased to 5.5 thousand? Then you just saved your money with the help of a banking institution. If the price has become higher, then even here they have lost part of their value (although not as fast as under the mattress). And to make an adjustment to the current state of affairs, we introduced a special indicator - this is the real interest rate. Usually these indicators are different. But it can be such that the real interest rate is equal to the nominal, but this is possible only in the absence of inflation or deflation.
Fields of application
Where can you meet the nominal interest rate? Indeed, for the best conduct of their financial affairs, it is always necessary to make an adjustment to the real situation:
- Lending.
- Investment.
- Depositing.
Although this is a small list, it lists all the most important and what you are most likely to encounter in everyday life. What is also important is under the influence of which the nominal interest rate in its value changes. This is the currency, terms and legal features.
Lending: features when targeting a nominal rate
We should also make a reservation about the features that lending has. The fact is that its term can range from several tens of months to decades. Therefore, special attention should be paid to such "simple" issues as the term, monetary unit and legal features. So, if we talk about the return of short-term loans, it should be said that, taking them, you should not expect problems. The likelihood of some shocks, resulting in hyperinflation and, accordingly, the bank will lose its money, is quite small.Therefore, the issuance of money in such cases is carried out in rubles. But if the period is several decades, then there is a possibility that the bank will minimize its profit or even lose it if it acts according to the old scheme. And in most cases it gives out loans in dollars. But it’s in your interests to arrange everything in such a way that the money will be issued in rubles - it’s for you and it’s profitable. Therefore, when you have a choice, always bet on the national currency of the Russian Federation.
Compound interest
When deciding where to invest or deposit your money, you can ask about compound interest. In order to better understand what it is, let’s explain what they call it economic effect, when all profit at the end of each period is added to the principal amount. The obtained value from the next period becomes the original and on it, in fact, and new interest is accrued. How is the nominal interest rate calculated? The formula for calculating the profit you can use to estimate the likely income:
BS = TS (1 + PSRP \ 100%)crp
Now about its decoding:
- BS - future value. The parameter that provides us the most interest.
- TS - current value. Nominal amount of money (or their purchasing power).
- PSRP - the interest rate of the billing period (a day, month or year can be used in its quality).
- KRP - the number of billing periods.
Now we can say that you know everything about the nominal interest rate.
