Effective Interest Rate Calculator

Your details

The stated (nominal) annual interest rate before compounding effects are applied. This is the rate typically advertised on loans and savings accounts.
%
How many times per year interest is calculated and added to the principal. More frequent compounding produces a higher effective rate.
How many years you want to hold the investment or loan. Used to calculate the total effective rate over the full term and to build the balance chart.
years
An initial deposit or loan principal. Used to compute the projected final balance and the year-by-year chart. Leave at zero to skip balance projections.
Currency
Effective Annual Rate (EAR)Moderate yield
0.0617%

True annual yield after compounding - the rate that matters for comparison

Rate per compounding period0.005%
Total effective rate over term0.3489%
Projected final balance$13,488.50
Total interest earned$3,488.50
Compounding periods per year12
Effective Annual Rate0.0617%

EAR is 6.1678% - higher than the 6% stated rate due to compounding.

  • Your nominal rate of 6% compounded 12x per year is equivalent to an effective annual rate of 6.1678%.
  • Over 5 years, money grows by a total of 34.89% relative to the starting balance.
  • A starting balance of 10,000 grows by 3,488.5 in interest over the term.
  • Compounding more frequently adds 0.1678% per year compared to simple annual compounding. This gap widens the longer the term.

Next stepWhen comparing loans or savings products, always use the EAR (sometimes called APY) rather than the stated rate, because the compounding frequency is already baked in.

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