The stated rate of interest, exclusive of any compounding, that is paid on an investment. For example, annual interest of $80 on a $1,000 investment is a nominal rate of 8%, whether the interest is paid in $20 quarterly installments, in $40 semiannual installments, or in an $80 annual payment. Use of nominal rates can be misleading when comparing returns from different investments. See also effective rate of interest.