Effective annual interest rate or annual equivalent rate calculator.

So The effective period interest rate is equal to the nominal annual interest rate divided by the number of periods per year n:

*Effective Period Rate* = Nominal Annual Rate / n

What is the effective period interest rate for nominal annual interest rate of 3% compounded monthly?

Solution:

*Effective Period Rate* = 3% / 12months = 0.03 / 12 = 0.250%

What is the effective period interest rate for nominal annual interest rate of 7% compounded monthly?

Solution:

*Effective Period Rate* = 7% / 12months = 0.07 / 12 = 0.583%

What is the effective period interest rate for nominal annual interest rate of 9% compounded monthly?

Solution:

*Effective Period Rate* = 9% / 12months = 0.9 / 12 = 0.750%

So The effective annual interest rate is equal to 1 plus the nominal interest rate in percent divided by the number of compounding persiods per year n, to the power of n, minus 1.

*Effective Rate* = (1 + Nominal Rate / n)^{n} - 1

What is the effective annual interest rate for nominal annual interest rate of 3% compounded monthly?

Solution:

*Effective Rate* = (1 + 3% / 12)^{12} - 1

= (1 + 0.03 / 12)^{12} - 1

= 0.03042 = 3.042%

What is the effective annual interest rate for nominal annual interest rate of 7% compounded monthly?

Solution:

*Effective Rate* = (1 + 7% / 12)^{12} - 1

= (1 + 0.07 / 12)^{12} - 1

= 0.07229 = 7.229%

What is the effective annual interest rate for nominal annual interest rate of 9% compounded monthly?

Solution:

*Effective Rate* = (1 + 9% / 12)^{12} - 1

= (1 + 0.9 / 12)^{12} - 1

= 0.09381 = 9.381%

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