Effective Annual Rate Calculator
Convert a nominal annual rate with periodic compounding into the true effective annual rate.
Results
Rate
6.1678
%
Rate
0.500000
%
What this tool does
A nominal rate of 6 % compounded monthly is not 6 % a year: each month's interest starts earning interest of its own, giving 6.168 % in practice. The effective rate is the only fair way to compare offers that compound at different frequencies.
Formula
APR = (1 + i ÷ n)^n − 1
Variables
| Symbol | Meaning | Unit |
|---|---|---|
r | Annual interest rate | % |
nn | Compounding periods per year | — |
EAR | Rate | % |
PER | Rate | % |
Worked example
- Annual interest rate6 %
- Compounding periods per year12
- Rate6.1678 %
- Rate0.500000 %
Limitations
- This is an informational calculator, not personalised financial advice. Rates, fees, taxes and contract conditions vary between institutions and countries.
- The calculation runs at full precision and only the display is rounded. If you copy an intermediate value and retype it, small differences can appear.