Annual Interest Rate Calculator
Calculate the effective annual interest rate from a nominal rate and compounding frequency, or find the nominal rate given the annual rate.
Published by:
isCalculator Editorial Team
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How to use this tool?
This calculator converts between nominal and effective annual interest rates. Follow these steps:
- Select Calculation Type – Choose “Effective Annual Rate from Nominal” to convert a nominal rate to effective, or “Nominal Rate from Effective Annual” for the reverse.
- Enter the Rate – Input the nominal or effective rate as a percentage (e.g., 5 for 5%). Must be a positive number.
- Choose Compounding Frequency – Pick how often interest compounds: Annually, Semi-Annually, Quarterly, Monthly, Daily, or Continuous.
- Click Calculate – Press the button to see the converted rate, displayed to four decimal places, along with the formula used.
Note: All rates are in percentage form. For continuous compounding, the calculator uses the natural exponential or logarithm functions.
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Frequently Asked Questions
The nominal rate is the stated annual rate without considering compounding, while the effective annual rate (EAR) accounts for the effect of compounding within the year. For example, a nominal rate of 5% compounded monthly yields an EAR of about 5.12%.
The more frequently interest is compounded, the higher the effective annual rate. For a given nominal rate, daily compounding yields a higher EAR than annual compounding.
Yes. Select 'Nominal Rate from Effective Annual' and enter the effective rate and compounding frequency to get the equivalent nominal rate.
