# EFFECT function

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.

## Description

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)`

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.

## 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:

• EFFECT (nominal_rate,npery) is related to NOMINAL(effect_rate,npery) through effective_rate=(1+(nominal_rate/npery))*npery -1.

## Example

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

• 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.

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 2010, Excel Web App, SharePoint Online for enterprises, SharePoint Online for professionals and small businesses