Article updated on April 12, 2018

The EFFECT function calculates the effective annual interest rate, given the nominal annual interest rate and the number of compounding periods per year.

Formula in cell D3:

=EFFECT(B3,C3)

Excel Function Syntax

EFFECT(nominal_rate, npery)

Arguments

nominal_rate Required. The nominal interest rate.
npery Required. The number of compounding periods per year.

Comments

This is how the EFFECT function is calculated:

=(1+(nominal_rate/npery))^npery