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Effective Interest Rate Calculator

Convert a nominal rate to the effective annual yield.

Last updated: 13 Aug 2026

Quick answer

The effective annual rate accounts for compounding: EAR = (1 + nominal ÷ 100 ÷ n)^n − 1. For example, 8% compounded quarterly gives an effective 8.24%. Enter the nominal rate and compounding above.

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The effective annual rate (EAR) shows the true yield once compounding is included: EAR = (1 + nominal ÷ 100 ÷ n)^n − 1, where n is the compounding frequency.

How to calculate effective interest rate

  1. 1 Enter the nominal annual rate.
  2. 2 Choose the compounding frequency.
  3. 3 We compute the effective annual rate.

Frequently asked questions

What is the effective annual rate?
The actual yearly return once compounding is accounted for, which is higher than the nominal rate when compounding more than once a year.
Why does frequency matter?
More frequent compounding earns interest on interest sooner, raising the effective rate.
Nominal vs effective?
Nominal is the stated rate; effective includes compounding, so it reflects what you actually earn.

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