Effective Rates
The Effective Rates calculation is used to find the effective annual interest rate for a given nominal rate compounded m times per year.
The effective annual interest rate is the rate which, if compounded annually, will yield the same amount of interest per year.
You can use this calculation to compare rates with different compounding frequencies.
Note: When using continuous compounding the effective periodic rate result displays a question mark, as in that case the periodic rate can't be calculated.
Input
| • nominal annual rate |
| • compounding frequency |
Results
| • effective annual rate |
| • effective periodic rate |
Example
| • | Bank
A offers 14.75 % compounded semiannually.
Answer: bank B offers an effective annual rate of 15.5035 % which is higher than that of bank A (15.2939 %). |
Related topics
| Nominal annual rate |
| Compound interest |
| Equivalent Rates |
| Periodic to Annual Rates |