Nominal Rate of Return, also known as the stated rate or coupon rate, is the interest rate that is specified on a financial instrument, such as a bond or a loan, at the time of issuance. It represents the rate at which interest payments will be made to the bond or loan holder, based on the face value of the instrument.

The nominal rate of return does not take into account the effects of inflation, and therefore does not reflect the real purchasing power of the interest payments received. To determine the true rate of return, the nominal rate must be adjusted for inflation using the inflation rate.

For example, if an investor holds a bond with a nominal rate of return of 5% and the inflation rate is 2%, the real rate of return would be 3%. In other words, the investor's purchasing power would increase by 3% per year after adjusting for inflation.

It is important to note that the nominal rate of return is different from the effective rate of return, which takes into account the effects of compounding. The effective rate of return reflects the total amount earned, including the effects of compounding, and is therefore a more accurate measure of the investment's performance.