Effective Interest Rate Calculator

Effective Interest Rate is also referred to as effective annual interest rate or annual equivalent rate. It aids in comparing the interest values for different types of compounding periods like daily, monthly, annually, or other. It helps to find the interest rate paid or received over a loan or any other financial product as a result of compounding over a given period of time. Find the effective interest rate per period and 5 periods with this Effective Interest Rate Calculator.

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Effective Interest Rate is also referred to as effective annual interest rate or annual equivalent rate. It aids in comparing the interest values for different types of compounding periods like daily, monthly, annually, or other. It helps to find the interest rate paid or received over a loan or any other financial product as a result of compounding over a given period of time. Find the effective interest rate per period and 5 periods with this Effective Interest Rate Calculator.

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Formula:

i = ( 1 + ( r / m ) )m - 1 it = ( 1 + ( r / m ) )m*t - 1 P=r/m Where, i = Effective Interest Rate per Period r = Nominal Rate per Period m = Compounding per Period t = Number of Periods it = Effective Rate for t Periods P = Rate per Compounding Interval

Example

A man has invested at a nominal interest rate of 7% per year compounding at a period of 12 months for a total period of 5 years.
Effective Rate per Period = ( 1 + ( 7 / 12 ) )12 - 1
= 7.229%
Effective Rate for t Periods =( 1 + ( 7 / 12 ) )12 x 5 - 1
= 41.7625%
Rate per Compounding Intereval = 7 / 12
= 0.5833%


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