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#Financial

EFFECT

Excel Functions

Get effective annual interest rate

Syntax

EXCEL 
=EFFECT(nominal_rate, npery)

Arguments

Parameter Description
nominal_rate The nominal or stated interest rate.
npery Number of compounding periods per year.

Return Value

Effective annual interest rate

Details

The EFFECT function calculates the effective annual interest rate, given a nominal interest rate and the number of compounding periods per year. Nominal interest rate is the stated rate on the financial product. Effective annual interest rate is the interest rate actually earned due to compounding. For example, with a nominal rate of 6.00% and interest compounded quarterly, EFFECT returns 6.09%: In the example shown, the formula in D5, copied down, is: Format the result as a Percentage to display with % symbol.

Examples

Example 1

The EFFECT function calculates the effective annual interest rate, given a nominal interest rate and the number of compounding periods per year. Nomin

EXCEL 
=EFFECT(0.06,4) // returns 0.0614
Example 2

In the example shown, the formula in D5, copied down, is:

EXCEL 
=EFFECT(B5,C5)

See Also

NOMINAL