Effective Interest Rate Calculator
Effective Interest Rate Calculator
Component |
Description |
Nominal Interest Rate |
The stated interest rate on a loan or investment. |
Number of Compounding Periods |
The number of times interest is compounded per year. |
Effective Interest Rate |
The annual interest rate that takes into account compounding. |
Formula |
Effective Interest Rate = (1 + Nominal Interest Rate / n)^n - 1 |
Purpose |
Used to compare the true cost or return of loans and investments with different compounding periods. |