# EFFECT

Returns the effective annual interest rate, given the nominal annual interest rate and the number of compounding periods per year.

If this function is not available, and returns the #NAME? error, install and load the Analysis ToolPak add-in.

2. In the Add-Ins available list, select the Analysis ToolPak box, and then click OK.
3. If necessary, follow the instructions in the setup program.

Syntax

EFFECT(nominal_rate,npery)

Nominal_rate     is the nominal interest rate.

Npery     is the number of compounding periods per year.

Remarks

• Npery is truncated to an integer.
• If either argument is nonnumeric, EFFECT returns the #VALUE! error value.
• If nominal_rate ≤ 0 or if npery < 1, EFFECT returns the #NUM! error value.
• EFFECT is calculated as follows:

Example

The example may be easier to understand if you copy it to a blank worksheet.

1. Create a blank workbook or worksheet.
2. Select the example in the Help topic.

Note   Do not select the row or column headers.

Selecting an example from Help
1. Press CTRL+C.
2. In the worksheet, select cell A1, and press CTRL+V.
3. To switch between viewing the results and viewing the formulas that return the results, press CTRL+` (grave accent), or on the Formulas tab, in the Formula Auditing group, click the Show Formulas button.
A B
Data Description
5.25% Nominal interest rate
4 Number of compounding periods per year
Formula Description (Result)
=EFFECT(A2,A3) Effective interest rate with the terms above (0.053543 or 5.3543 percent)

Applies to:
Excel 2003