What is the difference between nominal and compound interest rates?

Asked by Peter Ross on March 21st, 2012 @ 6:39 p.m.
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Nominal interest refers to the interest rate before inflation is taken into account. Nominal interest rate=real interest rate + inflation.
Compound interest refers to the interest that builds on the principle and existing accumulated interest. This is also referred to as 'interest on interest.' With compounding interest, the principal grows faster than with simple interest (simple interest=interest on original principle amount with no compounding effects).
Answered by Chido Munangagwa on April 11th, 2012 @ 3:38 p.m.