EFFECT 
EFFECT(nominal_rate, npery) 
Returns the effective interest rate given a nominal interest rate and compounding frequency. 
nominal_rate  The interest rate for the year. 
npery  The number of compounding periods per year. 
REMARKS 
* This function is closely related to the NOMINAL function. * An effective interest rate is an interest rate that is compounded annually making it easy to compare different interest rates. * The Effective Rate is also known as the Annual Rate, Effective Annual Rate (EAR) or Annual Equivalent Rate (AER). * If any of the arguments are not numeric, then #VALUE! is returned. * The "nominal rate" can either be entered with a percentage sign or as a decimal. * If "nominal_rate" = 0, then #NUM! is returned. * If "npery" is not an integer, it is truncated. * If "npery" < 1, then #NUM! is returned. * For an illustrated example refer to the Interest Rates > Effective Interest page. * In Excel 2007 the accuracy of this function was improved. * For the Microsoft documentation refer to support.microsoft.com 

1  If you have an nominal interest rate of 5% compounded annually, what is the effective interest rate. 2  This is the same as 1. 3  If you have an nominal interest rate of 5% compounded semiannually, what is the effective interest rate. 4  If you have an nominal interest rate of 5% compounded monthly, what is the effective interest rate. 5  If you have an nominal interest rate of 5% compounded daily, what is the effective interest rate. 6  where "nominal" > 1 7  what if npery < 0 8  what if "nominal_rate" is not numeric 9  what if "npery" is not numeric 
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