MulticalcEffective Annual Rate (EAR) Calculator
Convert nominal rates to effective annual yieldEnter the nominal rate and compounding frequency to calculate the true annual yield (EAR).
Results
Enter a nominal rate and compounding frequency to compute the Effective Annual Rate.
About Effective Annual Rate (EAR)
The Effective Annual Rate (EAR) is the interest rate that reflects compounding over a year — it shows the true annual return when interest compounds more frequently than annually. Use EAR to compare financial products that use different compounding schedules.
Key Concepts
- Nominal Rate (APR): The stated annual interest rate, not accounting for intra-year compounding.
- Compounding Frequency: How often interest is applied (monthly, quarterly, daily, or continuously).
- EAR formula (periodic): EAR = (1 + r/n)n - 1, where r = nominal rate (decimal), n = periods per year.
- Continuous compounding: EAR = er - 1 when interest compounds continuously.
Practical Uses
Compare savings accounts, loans, mortgages, credit cards, and investment products using EAR — especially when one product compounds monthly and another compounds daily or continuously.
Note: Lenders and issuers sometimes quote APR to make rates look lower. Always compare on
an effective annual basis to understand real cost or yield.
Frequently Asked Questions
Because APR ignores intra-year compounding. When interest compounds more
than once per year, the effective annual rate increases.
Convert both nominal rates to EAR using this calculator and compare the
effective percentages.
EAR does not include fees, taxes, or amortization schedule effects. For
loans, include fees or compute APR as required by disclosures and then convert to EAR if comparing
effective cost.
Yes, EAR is the gold standard for comparing products with different
compounding. However, always check for hidden fees or special terms.
Yes, EAR is used for both. For loans, it shows the true cost; for
investments, it shows the true yield.