EFFECT function

Returns the effective annual interest rate, given the nominal annual interest rate and the number of compounding periods per year.

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:

    Equation

Example

The example may be easier to understand if you copy it to a blank worksheet.

How to copy an example

  1. Create a blank workbook or worksheet.

  2. Select the example in the Help topic.

    Note   Do not select the row or column headers.

    Selecting an example from Help

    Selecting an example from Help

  3. Press CTRL+C.

  4. In the worksheet, select cell A1, and press CTRL+V.

  5. To switch between viewing the results and viewing the formulas that return the results, press CTRL+` (grave accent), or on the Formulas tab, in the Formula Auditing group, click the Show Formulas button.

1

2

3

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)

Applies To: Excel 2007



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