What is the term for the interest rate paid on debt securities without accounting for any loss of purchasing power?

The correct term for the interest rate paid on debt securities without considering the loss of purchasing power due to inflation is the nominal rate of interest. The nominal rate represents the stated or advertised interest rate that borrowers pay to lenders, and it reflects the actual cash flow of interest payments without any adjustments for inflation.

In contrast, the real rate of interest accounts for inflation, providing a clearer picture of the purchasing power of the interest earned. The real risk-free interest rate is specifically the rate of return on investments with no risk of financial loss, after adjusting for inflation. Current yield refers to the annual income from an investment, such as a bond, expressed as a percentage of its current market price, which does not strictly define the interest rate itself.

Understanding the distinction between these terms is crucial for analyzing debt securities and making informed financial decisions, particularly in an inflationary environment where nominal rates may not accurately reflect the benefits to investors.