## Summary

The Excel EFFECT function returns the effective annual interest rate, given a nominal interest rate and the number of compounding periods per year. Effective annual interest rate is the interest rate actually earned due to compounding.

## Purpose

Get effective annual interest rate

## Return value

Effective annual interest rate

## Syntax

``=EFFECT(nominal_rate,npery)``
• nominal_rate - The nominal or stated interest rate.
• npery - Number of compounding periods per year.

## How to use

The EFFECT function calculates the effective annual interest rate, given a nominal interest rate and the number of compounding periods per year. Nominal interest rate is the stated rate on the financial product. Effective annual interest rate is the interest rate actually earned due to compounding.  For example, with a nominal rate of 6.00% and interest compounded quarterly, EFFECT returns 6.09%:

``````=EFFECT(0.06,4) // returns 0.0614

``````

In the example shown, the formula in D5, copied down, is:

``````=EFFECT(B5,C5)
``````

Format the result as a Percentage to display with % symbol.

### Notes

• Npery should be an integer (Excel will truncate if not).
• The nominal_rate should be a number between 0 and 1. Author ### Dave Bruns

Hi - I'm Dave Bruns, and I run Exceljet with my wife, Lisa. Our goal is to help you work faster in Excel. We create short videos, and clear examples of formulas, functions, pivot tables, conditional formatting, and charts.