Finance · Interest Rates · Free

Effective Interest Rate Calculator

A 12% rate compounded monthly is really 12.68% a year. Enter the nominal annual interest rate, pick the compounding period — days, weeks, months, quarters, or your own number of periods per year — and get the effective period interest rate and the effective annual interest rate (annual equivalent rate), computed right in your browser.

STEP 1

Enter the nominal annual rate

Type the stated (nominal) annual interest rate in percent — 12 means 12% a year. This is the rate on the contract, before compounding does its work.

STEP 2

Choose the compounding period

Pick Days, Weeks, Months, or Quarters and n (periods per year) fills in automatically as 365, 52, 12, or 4. Pick Other and type any positive n yourself — 2 for semi-annual, 24 for semi-monthly, and so on.

STEP 3

Calculate and compare

Press Calculate to read the effective period interest rate (% per day, week, month, quarter, or period) and the effective annual interest rate (% per year). Reset clears everything and starts over.

How the math works

What formulas does this calculator use?: The effective period rate is the nominal annual rate divided by the number of periods per year n: Effective Period Rate = Nominal Annual Rate / n. The effective annual rate is Effective Rate = (1 + Nominal Rate / n)ⁿ − 1, with the nominal rate as a decimal.
Why is the effective annual rate higher than the nominal rate?: Because each period's interest earns interest within the year. The more often interest compounds — daily beats monthly beats quarterly — the further the annual equivalent rate rises above the nominal rate for the same stated percentage.
What n do Days, Weeks, Months, and Quarters use?: This calculator uses the conventional counts n = 365, 52, 12, and 4 periods per year. Use Other if your product counts periods differently (for example n = 360 banker's days).
What happens as n gets very large?: The effective annual rate approaches the continuous-compounding limit e^r − 1. For 10% that limit is about 10.5171% — barely above daily compounding's 10.5156%.
Worked example: A 12% nominal rate compounded monthly (n = 12): the period rate is 12% / 12 = 1% per month, and the effective annual rate is (1 + 0.12/12)¹² − 1 = 12.6825% per year.

Privacy: every calculation runs in your browser tab — no value you type is sent anywhere. This tool is for estimation, not financial advice.