Advanced Excel Financial - EFFECT Function

Description

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

Syntax

EFFECT (nominal_rate, npery)

Arguments

Argument	Description	Required/ Optional
Nominal_rate	The nominal interest rate.	Required
Npery	The number of compounding periods per year.	Required

Notes

EFFECT is calculated as follows −

$$EFFECT = \left ( 1 + \frac{Nominal\_rate}{Npery} \right )^{Npery} -1$$
Npery is truncated to an integer.
If either of the arguments is nonnumeric, EFFECT returns the #VALUE! error value.
If nominal_rate ≤ 0 or if npery < 1, EFFECT returns the #NUM! error value.
EFFECT (nominal_rate,npery) is related to NOMINAL(effect_rate,npery) through

effective_rate= (1+(nominal_rate/npery))*npery -1

Applicability

Excel 2007, Excel 2010, Excel 2013, Excel 2016

Example

advanced_excel_financial_functions.htm