**NOMINAL
INTEREST RATE**

**The
interest rate quoted by lending institutions is usually the nominal
rate. This is the simple multiplication the periodic rate by the
number of periods in the year. For example, the quoted monthly rate
by 12. **

**However,
the more important and accurate rate is the ***annual
effective rate*.
For example, a quote of 1% per month as 12% pa nominal is in reality,
12.68% pa effective.