Effective annual rate calculator
Enter the nominal rate and compounding frequency to get the effective rate.
Effective annual rate calculator
Convert a nominal annual rate into the effective annual rate (EAR) — the rate you actually pay or earn once compounding within the year is counted. The more often interest compounds, the higher the effective rate.
Formula
EAR = (1 + r ÷ n)ⁿ − 1, where r is the nominal annual rate and n the number of compounding periods per year. Example: 12% compounded monthly gives an EAR of 12.68%, not 12%. This is the difference behind nominal vs effective (in the EU, often TIN vs TAE).
Frequently asked questions
Why is the effective rate higher than the nominal one? Because interest earns interest within the year — more frequent compounding widens the gap.
What does n stand for? The compounding periods per year: 12 for monthly, 4 for quarterly, 365 for daily.