EFFECT

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, run the Setup program to install the Analysis ToolPak. After you install the Analysis ToolPak, you must enable it by using the Add-Ins command on the Tools menu.

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

EFFECT(5.25%,4) equals 0.053543 or 5.3543 percent