EFFECT(nominal_rate, npery)

Returns the effective interest rate given a nominal interest rate and compounding frequency.

nominal_rateThe interest rate for the year.
nperyThe 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.
* In Excel 2003 this function was only available when you had the Analysis ToolPak add-in loaded.
* For the Microsoft documentation refer to support.office.com

 A
1=EFFECT(5/100,1) = 5.000%
2=EFFECT(5%,1) = 5.000%
3=EFFECT(5%,2) = 5.062%
4=EFFECT(5%,12) = 5.116%
5=EFFECT(5%,365) = 5.127%
6=EFFECT(5,2) = 1125.000%
7=EFFECT(5%,-2) = #NUM!
8=EFFECT("some text",2) = #VALUE!
9=EFFECT(5%,"some text") = #VALUE!

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 semi-annually, 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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