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Trading and Investment Terms

Nominal Rate of Return

The nominal rate of return can be defined as the measure of money produced by a speculation prior to accounting for costs such as taxes, investment fees, as well as inflation.


If an investment produced a 10 per cent return, the nominal rate is going to be equal to 10%. After accounting for inflation during the investment time frame, the actual return would almost certainly be lower.


In any case, the nominal rate of return has its benefits as it enables investors to contrast the performance of an investment regardless of the various tax rates that may be applied for every investment.


The Formula for calculating the Nominal Rate of Return is


Nominal Rate of Return = Present day market value − Original investment value / original investment value


How to Calculate the Nominal Rate of Return


In order to calculate the Nominal Rate of Return, subtract the initial investment value ( or the principal sum invested ) from the present day market value of the investment (or towards the end of the investment time frame ).


Take the outcome from the numerator and divide it by the initial investment value.


Multiply the outcome by 100 to get the nominal rate of return in the format of percentage.