## Effective interest rate calculation and how calculate effective interest rate

#### Effective period interest rate calculation

The *effective period interest rate* is equal to the *nominal annual interest rate* divided by the number of periods per year *n:*

*Effective Period Rate* = Nominal Annual Rate / n

#### Effective annual interest rate calculation

The effective interest rate is equal to 1 plus the nominal interest rate in percent divided by the number of compounding persiods per year n, to the power of n, minus 1.

*Effective Rate* = (1 + *Nominal Rate* / *n*)^{n} - 1