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EFFECT
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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.
How?
- On the Tools menu, click Add-Ins.
- In the Add-Ins available list, select the Analysis ToolPak box, and then click OK.
- 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.
How?
- Create a blank workbook or worksheet.
- Select the example in the Help topic. Do not select the row or column headers.
Selecting an example from Help
- Press CTRL+C.
- In the worksheet, select cell A1, and press CTRL+V.
- To switch between viewing the results and viewing the formulas that return the results, press CTRL+` (grave accent), or on the Tools menu, point to Formula Auditing, and then click Formula Auditing Mode.
|
|
| 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) |
|
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