- In reference to a fee, nominal means very small relative to the underlying product or service.
- Nominal value, pertaining to stocks and bonds, refers to a security's face value or par value.
- Nominal returns are growth rates that are not adjusted for inflation.
Nominal fees are often associated with the purchase of add-ons when the customer has already bought a core product. You might reserve a hotel room, for example, and have the option to upgrade at check-in for a "nominal fee." The implication is that the fee is low relative to the value of the upgrade.
Nominal fees can also appear in arm-in-arm transactions that require money to change hands. As an example, a generous property owner might sell real estate at a steep discount to a relative. Say the property has a market value of $200,000, but the recorded sale price is $200. In that scenario, the $200 is nominal.
The nominal value of a bond is its par value, which is often different from the bond's market value. The par value equals the principal to be repaid when the bond matures. It also dictates the amount of interest paid on that bond.
The nominal value of a common stock, however, is less meaningful. A stock's nominal value is an arbitrary number defined in the corporate articles of incorporation. It's commonly less than $1 and much lower than the stock's trading price.
Nominal rates of returns are percentage changes in value without adjustments. You might see nominal rates in reference to a stock portfolio, a mutual fund's performance, or the growth or contraction of the GDP.
