Effective Annual Rate Calculator
Convert nominal interest rates into the True Effective Annual Rate based on compounding frequency.
Nominal vs Effective Rates
Banks often advertise a "Nominal" interest rate, such as 12% per year. However, if interest compounds monthly (which means 1% per month), you earn interest on your interest during the year.
The Truth in Lending
Due to compounding, that 12% nominal rate actually results in an Effective Annual Rate (EAR) of 12.68%. This calculator reveals the true cost or yield of financial products.
Disclaimer: This calculator is for educational and informational purposes only. It is not a substitute for professional financial advice. Results are estimates based on the information provided and may not reflect actual outcomes. Please consult with a qualified financial advisor, accountant, or tax professional before making any financial decisions. Past performance does not guarantee future results.