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Effective Interest Rate from Nominal Rate
Financial - Wealth
Saturday, 30 September 2006 01:00

Suppose the bank pays you 3 % interest per year. The quoted rate is often the so-called the yearly nominal interest rate. For example if 1 % interest is paid each month, then the nominal yearly rate is 12 %. Also, if the yearly nominal interest is 6 % and interest is paid twice per year then each time 2 % is paid.

But what if the interest is paid at the end of each trimester, or at the beginning of every day ?

This form calculates the real interest rate given the yearly nominal rate. The computed interest rate is also called the effective interest rate.

This calculator does not take any costs into account. See this calculator with this example to compute the effective interest with (transaction) costs.

Nominale Interest Rate(%):
Time interest payment: Afterwards in advance

Effective Interest Rate (%/year):