EFFECT

Using the Excel EFFECT Function

Summary

The Excel EFFECT function returns the effective annual interest rate when given the nominal annual interest rate and the number of compounding periods per year.

Syntax

=EFFECT (nominal_rate, npery)

Syntax Breakdown

Nominal Rate
Required. Nominal interest rate entered as a number between 0 and 1.

Npery
Required. Number of compounding periods per year. Non-integer values will be truncated.


Usage Notes

EFFECT returns the effective annual interest rate. The effective rate is that interest rate which is actually earned due to compounding. Use the NOMINAL function to find the nominal interest rate, or the rate that is stated on a financial product.

EFFECT Errors
The function returns the #NUM! error if nominal rate is less than or equal to 0 or if npery is less than 1.

The function returns the #VALUE! error if either argument is non-numeric.