# Effective interest rate calculator

We are providing Effective annual interest rate calculator to aid you in interest calculation.

## Effective interest rate calculation

#### Effective annual interest rate calculation

The effective interest rate is apparently equal to the addition of 1 plus the nominal interest rate which is to be in percent and then divided by the number of compounding periods per year n, to the power of n, subtracting 1.

**Effective Rate = (1 + Nominal Rate / n) ^{n} – 1**

#### Effective period interest rate calculation

The effective period interest rate is totally equal to the nominal annual interest rate which is divided by the number of periods every year n:

**Effective Period Rate = Nominal Annual Rate / n**

## Learn to calculate effective interest rate

Here are the Effective interest rate calculations to help yo calculate with ease.

### Effective period interest rate calculation

The effective period for a particular interest rate is apparently equal to the nominal annual interest rate which is divided by the total number of periods per year n:

**Effective Period Rate = Nominal Annual Rate / n**

#### For Example

If you need to calculate the effective period interest rate for the nominal annual interest rate of 6% compounded monthly?

Effective Period Rate = 6% / 12 months = 0.06 / 12 = 0.005%

### Effective annual interest rate calculation

The formula used to calculate effective annual interest rate is that equal to the sum of number 1 and the nominal interest rate in percent is divided by the total number of compounding periods every year n, to the power of n, subtracting 1.

**Effective Rate = (1 + Nominal Rate / n) ^{n} – 1**

#### For Example

If you need to calculate the effective annual interest rate for the nominal annual interest rate of 4% compounded monthly?

Effective Rate = (1 + 4% / 12)^{12} – 1

= (1 + 0.04 / 12)^{12} – 1

= 4.074 %