## How to use the EFFECT function

*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*### Functions in 'Financial'

The EFFECT function function is one of many functions in the 'Financial' category.

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