This article describes the formula syntax and usage of the EFFECT function (function: A prewritten formula that takes a value or values, performs an operation, and returns a value or values. Use functions to simplify and shorten formulas on a worksheet, especially those that perform lengthy or complex calculations.) in Microsoft Excel.
Returns the effective annual interest rate, given the nominal annual interest rate and the number of compounding periods per year.
The EFFECT function syntax has the following arguments (argument: A value that provides information to an action, an event, a method, a property, a function, or a procedure.):
- Nominal_rate Required. The nominal interest rate.
- Npery Required. The number of compounding periods per year.
- 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:
- EFFECT (nominal_rate,npery) is related to NOMINAL(effect_rate,npery) through effective_rate=(1+(nominal_rate/npery))*npery -1.
The example may be easier to understand if you copy it to a blank worksheet.
How do I copy an example?
- Select the example in this article. If you are copying the example in Excel Online, copy and paste one cell at a time.
Important: Do not select the row or column headers.
Selecting an example from Help
- Press CTRL+C.
- Create a blank workbook or worksheet.
- In the worksheet, select cell A1, and press CTRL+V. If you are working in Excel Online, repeat copying and pasting for each cell in the example.
Important: For the example to work properly, you must paste it into cell A1 of the worksheet.
- 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.
After you copy the example to a blank worksheet, you can adapt it to suit your needs.
||Nominal interest rate
||Number of compounding periods per year
||Effective interest rate with the terms above (0.053543 or 5.3543 percent)