﻿ EFFECT function

# 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:

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

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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