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# Finance Dictionary - N Terms

# Nominal Risk Free Interest Rate

Potential savers have little incentive to invest unless their expected returns include some protection against expected inflation. To try to protect themselves from a loss of purchasing power, investors will demand a return that reflects inflationary expectations. This return is called the nominal riskfree interest rate; it represents the observed or published return on a risk-free asset. The nominal risk-free rate depends upon: the real risk-free rate and the expected inflation rate.