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LSDefine
Simple English definitions for legal terms
stated rate
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A quick definition of stated rate:
Stated rate: This is another term for the nominal rate, which is the interest rate that is stated or advertised by a lender. It is the rate that is used to calculate the interest on a loan or investment, but it may not reflect the true cost of borrowing or the actual return on an investment.
A more thorough explanation:
STATED RATE
The stated rate is the same as the nominal rate under interest rate.
The stated rate is the interest rate that is explicitly stated in a loan agreement or investment contract. It is also known as the nominal rate. This rate does not take into account any compounding that may occur over time. It is simply the rate that is stated upfront.
Example 1: A bank offers a loan with a stated rate of 5%. This means that the borrower will pay 5% interest on the loan each year, without any compounding.
Example 2: An investor purchases a bond with a stated rate of 3%. This means that the investor will receive 3% interest on the bond each year, without any compounding.
These examples illustrate how the stated rate is the interest rate that is explicitly stated upfront, without taking into account any compounding that may occur over time.