EAR Calculator – Effective Annual Rate
Convert a nominal annual interest rate into an effective annual rate with periodic compounding.
Formula
EAR = [(1 + nominal%/(100×m))^m − 1] × 100%
Effective annual rate ≈ ((1+(12)÷(100×(12)))^(12)-1)×100
How to use
- Enter the nominal annual interest rate.
- Set compounding periods per year: 1, 12 or 365, for example.
- Read the effective annual rate.
Examples
- Nominal 12% compounded twice a year gives 12.36% EAR.
Frequently asked questions
Is EAR the nominal rate?
No. It includes interest earned or charged on prior interest.
Are fees or taxes included?
No. This is a pure compounding comparison at a fixed rate.
Does the period frequency mean payment frequency?
No. It is the number of times interest is compounded per year.
Sources
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