Online Effective Interest Rate Calculation
Convert nominal annual rate to effective annual rate using (1 + r/n)^n - 1 with compounding periods per year.
Frequently Asked Questions
- What is the effective annual rate?
- The effective annual rate (EAR) is the actual rate after compounding. EAR = (1 + nominal/n)^n - 1, where n is compounding periods per year.
- When does EAR equal the nominal rate?
- When interest compounds once per year (n = 1), EAR equals the nominal rate.
- Why use effective rate?
- It lets you compare loans or investments with different compounding frequencies on an equal basis.
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