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Effective Interest Rate Calculator

Work out effective interest rate instantly with clear inputs, formula shown and shareable results.

About Effective Interest Rate Calculator

The effective rate restates a nominal quote to allow for compounding within the year, so a 9.5% rate compounded monthly actually costs about 9.92%. Comparing quotes with different compounding frequencies requires this conversion.

Formula

Effective rate

EAR = (1 + i/m)^m - 1

i
Nominal rate
m
Compounding periods

Worked example

With the default values below, Effective Interest Rate Calculator returns Effective Annual Interest Rate of 9.9248%. Change any input above and every figure here is recalculated in your browser.

Inputs used

Nominal Annual Rateaccepts 0–100 %
9.5 %
Compounding Periods Per Yearaccepts 1–365
12
Amountminimum 0
200,000

Results

Effective Annual Interest Rate
9.9248%
Rate Per Compounding Period
0.791667%
One Year Of Interest On The Amount
$19,849.52
Extra Cost From Compounding
$849.52

Step by step

  1. 1Values used
  2. 2Effective rate
  3. 3Effective Annual Interest Rate= 9.9248
  4. 4Rate Per Compounding Period= 0.791667
  5. 5One Year Of Interest On The Amount= 19,849.52
  6. 6Extra Cost From Compounding= 849.52

Assumptions and limits

  • The result is derived only from the 3 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax or fees or charges into account.
  • Figures are rounded for display to 6 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • Figures are estimates. Lenders apply their own rounding, fees and eligibility rules, and rates change. This is not financial advice — confirm the numbers with your lender.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Figures are estimates. Lenders apply their own rounding, fees and eligibility rules, and rates change. This is not financial advice — confirm the numbers with your lender.

Frequently Asked Questions

Is the effective rate the same as APR?

Not quite. APR conventions may include fees but often quote a nominal rate; the effective rate captures compounding only.

Which should be used to compare deposits?

The effective rate, which is what banks call APY on savings products.

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