Why does compounding frequency matter?

More frequent compounding means interest earns interest sooner, increasing the effective rate. Monthly compounding at 12% nominal gives 12.68% EAR. Daily compounding gives 12.75%.

How do I convert EAR back to a nominal rate?

Nominal Rate = n × ((1 + EAR)^(1/n) − 1), where n is compounding periods per year.

Effective Annual Rate Calculator (EAR)

The Effective Annual Rate (EAR) — also called Annual Percentage Yield (APY) — is the actual interest rate you earn or pay after accounting for compounding. A nominal rate of 12% compounded monthly is actually 12.68% effective. Use this calculator to compare loans, credit cards, or savings accounts that compound at different frequencies.

Nominal Interest Rate (%)

Compounding Frequency

How to Use This Calculator

1
Enter the nominal (stated) interest rate.
2
Select how many times per year interest compounds.
3
Click Calculate to see the true effective annual rate.

Frequently Asked Questions

APR (Annual Percentage Rate) is the nominal rate without compounding. APY (Annual Percentage Yield) is the EAR — it includes compounding effects. For savings accounts, APY is what you actually earn. For loans, APR is typically stated.

Related Calculators

💰Compound Interest Calculator 💰Simple Interest Calculator 💰Mortgage Calculator