The nominal interest rate is the stated interest rate on a loan or investment, not adjusted for inflation. It represents the percentage of the principal amount that lenders charge borrowers or that investors earn on their deposits over a specific period, usually expressed annually. For example, if a bank offers a savings account with a nominal interest rate of 3%, it means that for every $100 deposited, the account holder will earn $3 in interest over one year. This rate does not account for the effects of inflation, which can erode the purchasing power of the interest earned.