The nominal rate of return is the amount of money generated by an investment before factoring in expenses such as taxes, investment fees, and inflation. If an investment generated a 10% return, the nominal rate would equal 10%.
The famous Fisher equation captures the relationship between nominal and real rate of return under inflation:
Real return = Nominal return - Inflation rate
For example, assume a bond pays an interest rate of 5% per year. If the inflation rate is currently 3% per year, then the real return on your savings is only 2%.