|
<< Click to Display Table of Contents >> EFFECT (effective interest rate) |
Syntax:
EFFECT(NomRate, NPerYear)
Description:
Returns the effective annual interest rate, given the nominal annual interest rate and the number of compounding periods per year.
NomRate is the nominal annual interest rate.
NPerYear is the number of compounding periods per year (must be at least 1).
Note:
This function does not calculate the effective annual interest rate according to the regulations of some countries (e.g. Germany: PAngV). It does not take into account any fees, commissions etc., but merely adds compound interest to the nominal interest rate over the year.
Example:
To calculate the effective annual interest rate of an investment with a nominal annual interest rate of 5%, compounded quarterly: How high is the annual percentage rate of charge?
EFFECT(5%, 4) returns approx. 5.09%
See also: