EAR Calculator - Effective Annual Rate

Your details

The stated or advertised interest rate before compounding, as a percentage. For example, enter 12 for 12%.
%
How many times per year interest is applied to the balance. The more frequent the compounding, the higher the effective rate.
Enter a starting balance to see the effective interest earned in one year. Leave at 0 to skip.
USD
Effective Annual Rate (EAR)High rate
12.6825%

True annual rate after compounding

Periodic rate1%
Extra interest vs. simple0.6825%
Interest earned (1 year)1,268.25
Ending balance (1 year)11,268.25
12.6825% %
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EAR: 12.6825% (nominal 12.00%)

  • A nominal rate of 12.00% compounded monthly (12/yr) has a true annual cost or yield of 12.6825%.
  • Compounding adds 0.6825 percentage points above the stated rate - money you either earn (if investing) or owe (if borrowing).
  • With 12 compounding periods per year, the periodic rate applied each period is 1.0000%.
  • On a $10,000 balance, you would earn $1268.25 in interest over the first year.

Next stepWhen comparing loans or savings accounts, always compare EARs - not nominal rates - because different compounding schedules make nominal rates incomparable.

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