How to Calculate a Nominal Rate

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A rate of return measures the percentage of growth or decline in a value over a period of time. A nominal rate does not take into consideration the effects of inflation or deflation. For example, if your stock portfolio increases by a nominal rate of 5 percent while the rate of inflation is 6 percent, you actually lose purchasing power.

Things You'll Need

  • Calculator
  • Look up the value of the item at the starting time and ending time. You can set the time period however you wish. For example, if calculating the nominal rate of return on a stock portfolio for the calendar year, set the starting time as Jan. 1 and the ending time as Dec. 31.

  • Subtract the initial value from the final value to calculate the change in value. In this example, if the starting value is $6,000 and the ending value is $6,300, subtract $6,000 from $6,300 to find a gain of $300.

  • Divide the change in value by the initial value to calculate the nominal rate. In this example, divide $300 by $6,000 to get a nominal rate of 0.05, or 5 percent.

References

  • Photo Credit Investment image by Svitlana Boldyryeva from Fotolia.com
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