Effective Annual Rate Calculator
It is a common truth that investments should be done carefully. Sometimes people who do not have impressive experience in investing money have an intention to try to earn.
An effective annual interest rate of an investment is a rate with the compounding occurring more than one time per year. In general, this type of interest rate seems to novice investors very complicated. Some people try to calculate this rate themselves using formulas, while it is enough to input only two necessary parameters – annual interest rate and periods in the year.
In a second you will see the detailed information you were looking for.
Effective Annual Rate Formula
The Effective Annual Rate Calculator uses the following formula:
- Effective Annual Interest Rate i = (1 + r/n) n - 1
- r is the nominal interest rate (expressed as a decimal),
- n is the number of payments per year.