What type of interest rate is expressed as a simple rate without adjusting for inflation?

The correct answer is the nominal rate. This type of interest rate is represented as the stated interest rate on a financial product, such as a loan or investment, before taking inflation into account. It reflects the contractual rate that is typically applied to a principal amount over a specified period.

In financial discussions, the nominal rate does not adjust for the effects of inflation, meaning it shows the earnings or cost of borrowing without considering the reduction in purchasing power that inflation may impose. For instance, if a savings account offers a nominal interest rate of 5%, that is the amount you would receive in interest, but it does not reflect any change in purchasing power due to inflation.

This differs from the real rate, which does adjust for inflation, effectively representing the true increase in purchasing power. The effective rate incorporates various compounding periods and can also account for fees or additional costs. Yield to maturity relates specifically to the total return anticipated on a bond if it is held until it matures, thus it does not fit into the concept of a simple interest rate.