Manuals/calci/EFFECT

EFFECT (NominalInterestRate,CompoundingPeriodsPerYear)

where,

• $NominalInterestRate$ is the nominal interest rate, and
• $CompoundingPeriodsPerYear$ is the number of compounding periods per year.
  • EFFECT(), returns the effective annual interest rate.

Description

EFFECT (NominalInterestRate,CompoundingPeriodsPerYear)

• Arguments $NominalInterestRate$ and $npy$ should be positive numeric values.
• $NominalInterestRate,$ should be >0 and $CompoundingPeriodsPerYear$ should be >1.
• For invalid arguments, Calci returns an error message.
• Formula: Effective interest rate $r$ is calculated as follows -

$r=(1+{\frac {nomrate}{npy}})^{npy}-1$

Examples

Consider the following example that shows the use of EFFECT function:

6%	8.5%
3	4

=EFFECT(A1,A2):  Displays 0.06120800000000015 as a result.
=EFFECT(B1,B2):  Displays 0.08774796172119137 as a result.
=EFFECT("6%",4): Displays 0.06136355062499965 as a result.

Related Videos

EFFECT

See Also

• RATE
• INTRATE

References

• Effective Interest Rate

• List of Main Z Functions

• Z3 home