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Finance

Effective Annual Rate Calculator

Convert a nominal annual interest rate into an effective rate with periodic compounding.

Amounts stay on this deviceMethod and assumptions below

Your financial inputs

Runs on your device

YOUR FINANCIAL SUMMARY

Your result

Let’s calculate.

Use the Calculate button to see your result.

Estimate based on your inputs and the stated assumptions.

How to use this tool

  1. Enter nominal annual rate, compounding periods per year.
  2. Select Calculate to view the result.
  3. Check the method and assumptions below before using the result.

The method, explained

Effective annual rate = [(1 + nominal rate/100 ÷ periods)^periods − 1] × 100.

A WORKED EXAMPLE

A 12% nominal rate compounded monthly has an effective annual rate of about 12.6825%.

What to keep in mind

Assumes equal compounding periods and a constant nominal rate. Fees, taxes and cash-flow timing are excluded; this is not a jurisdiction-specific APR calculation.

Common questions

What does 12 periods mean?

Interest is compounded monthly under the equal-period model.

What happens with one period?

Annual compounding makes the effective rate equal to the nominal annual rate.

Methodology maintained by ClarityKit. How these tools are built and checked.