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Excel EFFECT Function

You are here: Home / Excel Functions / Excel EFFECT Function

The Excel EFFECT Function returns the effective annual interest rate, from the nominal annual interest rate (APR), and the number of compounding periods per year.

Excel EFFECT Function Syntax

Syntax: =EFFECT(nominal_rate, npery)
 

Arguments

 
nominal Nominal Interest Rate (APR) Annual interest rate, also known as APR (Annual Percentage Rate)
npery Number of Periods Number of periods that interest is calculated
 

Example

Let’s say the APR quoted by your bank is 7.5% and the repayments are monthly:

Excel EFFECT Function

The APY (Annual Percentage Yield), or AER (Annual Equivalent Rate) is 7.76%. The compounding effect results in a slightly higher rate than you’re quoted by the lender.

Excel EFFECT Function Calculator

Enter your own values into the EFFECT Function calculator (grey cells below) to try it out.

Tip: Remember, to enter interest rates with a percentage symbol, or their decimal equivalent. E.g. 7.5% or 0.075.

 

Related Functions

PMT Returns the regular repayments for a loan based on a constant interest rate.
ACCRINT Returns the accrued interest that gets paid periodically.
FV Calculate the future value of an investment.
NPER Calculates the number of periods to reach an investment goal.
 

Learn more about interest rates here.

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