The EFFECT function calculates the effective annual interest rate. This uses the given nominal annual interest rate, nominal_rate, and the number of periods per year where compound interest is applied, npery. EFFECT uses the formula:
For example, the formula:
EFFECT(7 %, 4)
returns an effective annual interest rate of 7.19% or 0.0719, which is the overall interest rate over a year when the interest has been calculated quarterly at 7/4% and compounded.
EFFECT is the inverse of NOMINAL (see NOMINAL).
See also: