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Effective Annual Rate (EAR) Calculator

Enter nominal annual interest rate and compounding frequency to compute the periodic rate and EAR.

Effective Annual Rate (EAR) Calculator

Do you want to know the real annual interest rate on your investment or loan once compounding is factored in? Our Effective Annual Rate (EAR) Calculator makes it simple to convert nominal annual rates (APR) into effective annual rates based on your chosen compounding frequency. By entering your annual interest rate (APR %) and selecting how often interest compounds (daily, weekly, monthly, semi-annually, or annually), you can instantly see both the periodic rate and the EAR.

Understanding Effective Annual Rate (EAR)

Nominal Annual Rate (APR):The APR is the stated annual interest rate without considering the effect of compounding.

Effective Annual Rate (EAR):EAR (sometimes called “effective yield”) accounts for compounding periods during the year, showing the true return on an investment or the real cost of borrowing.

👉 Key Insight:The more frequently interest compounds, the higher the EAR compared to the nominal APR.

Formula to Calculate EAR

EAR = (1 + APR/n)ⁿ − 1

Where:
APR = Annual Nominal Rate (decimal form)
n = Number of compounding periods per year

Examples of EAR Calculations Using the Calculator

Example 1: Monthly Compounding (12/yr)

APR: 9%
Compounding Frequency: Monthly (12 times per year)

Step 1: Periodic Rate
APR ÷ n = 9% ÷ 12 = 0.75%

EAR = (1 + 0.09 ÷ 12)¹² – 1 = 9.3807%

✅ Final Result: Periodic Rate = 0.75% | EAR = 9.38%

Example 2: Annual Compounding (1/yr)

APR: 9%
Compounding Frequency: Annually

EAR = (1 + 0.09 ÷ 1)¹ – 1 = 9.00%

✅ Final Result: Periodic Rate = 9.00% | EAR = 9.00%

👉 With annual compounding, the EAR is equal to the APR.

Example 3: Semi-Annual Compounding (2/yr)

APR: 9%
Compounding Frequency: Semi-Annually

EAR = (1 + 0.045)² – 1 = 9.2025%

✅ Final Result: Periodic Rate = 4.50% | EAR = 9.20%

Example 4: Weekly Compounding (52/yr)

APR: 9%
Compounding Frequency: Weekly

EAR = (1 + 0.09 ÷ 52)⁵² – 1 ≈ 9.408917%

✅ Final Result: Periodic Rate = 0.1731% | EAR = 9.408917%

Example 5: Daily Compounding (365/yr)

APR: 9%
Compounding Frequency: Daily

EAR = (1 + 0.09 ÷ 365)³⁶⁵ – 1 ≈ 9.4162%

✅ Final Result: Periodic Rate = 0.02466% | EAR = 9.4162%

👉 As compounding frequency increases (from annual → monthly → daily), the EAR rises slightly, reflecting the true effect of compound interest.

Features of Our Effective Annual Rate (EAR) Calculator

Instant Results – EAR calculation based on APR and compounding frequency
Detailed Output – Provides periodic rate and effective annual rate side by side
Flexible Options – Supports daily, weekly, monthly, semi-annual, and annual compounding
User-Friendly – Simple design, quick results
Cross-Device – Works on desktop, tablet, and mobile
Free Access – 100% free, no sign-up required

Who Should Use This Calculator?

Investors – Compare real returns on savings accounts, bonds, and investments.
Borrowers – Understand the true cost of loans, mortgages, and credit cards.
Students & Educators – For finance, banking, and economics assignments.
Financial Planners – Prepare detailed reports for clients.
Banking Professionals – Explain interest rates and compounding to customers.

Why Use an Online EAR Calculator Instead of Manual Calculations?

Calculating EAR manually can be complex, especially with frequent compounding (daily or weekly). Errors are common when handling exponents. The EAR Calculator simplifies this process by giving accurate results instantly, saving time and ensuring precision.

Practical Applications

Loan Comparisons – Compare true costs of loans with different compounding structures.
Investment Decisions – Evaluate savings accounts or bonds with monthly vs daily compounding.
Financial Planning – Use EAR to forecast real interest growth.
Education – Learn how compounding affects nominal vs effective interest rates.

✅ The Effective Annual Rate (EAR) Calculator is an essential tool for anyone managing loans, investments, or financial planning. It provides clarity on the real cost or return, helping you make smarter money decisions.

👉 Try our Effective Annual Rate (EAR) Calculator today on Hive Calculator and understand the real power of compounding!