EFFECT function

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

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:

Equation

Example

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Selecting an example from Help

Selecting an example from Help
  • Press CTRL+C.
  • In the worksheet, select cell A1, and press CTRL+V.
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2
3
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 2007