Nominal-to-Effective Interest Rate
The effective interest rate is the interest rate on a loan or financial product restated from the nominal interest rate as an interest rate with annual compound interest payable in arrears.
The effective interest rate increases with the nominal interest rate and the number of compounding periods.
Formula
![QuantityVariable[Subscript["r", "eff"], "Unitless"] == -1 + (1 + QuantityVariable["r", "Unitless"]/QuantityVariable["n", "Unitless"])^QuantityVariable["n", "Unitless"]](https://www.wolframcloud.com/objects/resourcesystem/marketplacestorage/resources/e5c/e5c82954-b646-461a-b3f2-666cb7aeebe2/Webpage/FormulaImage.png "Copy to Clipboard")
| symbol | description | physical quantity |
|---|---|---|
| reff | effective interest rate | "Unitless" |
| n | compounding periods | "Unitless" |
| r | nominal interest rate | "Unitless" |
Forms
Examples
Get the resource:
| In[1]:= | ![ResourceObject["Nominal-to-Effective Interest Rate"]](images/e5c/e5c82954-b646-461a-b3f2-666cb7aeebe2-io-1-i.en.gif){kind=small} |
| Out[1]= |  |
Get the formula:
| In[2]:= | ![FormulaData[ResourceObject["Nominal-to-Effective Interest Rate"]]](images/e5c/e5c82954-b646-461a-b3f2-666cb7aeebe2-io-2-i.en.gif){kind=small} |
| Out[2]= |  |
Use some values:
| In[3]:= | ![FormulaData[
ResourceObject[
"Nominal-to-Effective Interest Rate"], {QuantityVariable[
\!\(\*SubscriptBox[\("r"\), \("eff"\)]\),"Unitless"] ->
Quantity[8.3`, "Percent"], QuantityVariable["n","Unitless"] -> 12}]](images/e5c/e5c82954-b646-461a-b3f2-666cb7aeebe2-io-3-i.en.gif){kind=small} |
| Out[3]= |  |