Effective Annual Rate Calculator

Convert nominal interest rates into the True Effective Annual Rate based on compounding frequency.

12 = Monthly, 4 = Quarterly, 365 = Daily
Effective Annual Rate (EAR)12.683%

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Nominal vs Effective Rates

Banks often advertise a "Nominal" interest rate, such as 12% per year. However, if interest compounds monthly (which means 1% per month), you earn interest on your interest during the year.

The Truth in Lending

Due to compounding, that 12% nominal rate actually results in an Effective Annual Rate (EAR) of 12.68%. This calculator reveals the true cost or yield of financial products.