Effective annual interest rate
Effective annual interest rate: use nominal annual interest, compounding periods per year. Review the formula, worked example and calculation steps.
Inputs
Use the units shown—
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Formula & explanation
EAR = [(1+r/(100n))^n−1] × 100
Variables & units
- Nominal annual interest
- % · minimum 0, maximum 100
- Compounding periods per year
- Numeric value · minimum 1, maximum 366
Worked example
12% nominal compounded monthly gives an effective annual rate of approximately 12.682503%.
Assumptions
Compounding-only effective rate. This does not include fees or define a regulated loan APR.
Formula version 1.0.0. JavaScript floating-point arithmetic applies. Results display up to 6 decimal places; stored values retain available precision. Use the units shown.
Practice with an example
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