Answer:
The correct answer is both the compensation for inflation as well as the real rate of interest.
Explanation:
Nominal rate of interest is the one which is described as the rate of interest before taking or considering the inflation into the account. The nominal could also defined as to advertised or state the rate of interest on the loan, without considering the account of any fees or any interest which is compounding.
So, the nominal rate of interest is the one which involve or comprise of the compensation for inflation and the real interest rate of the interest.
