What Is Effective Interest Brad Ryan, January 2, 2025 The actual rate of return on an investment or loan, expressed on a per-year basis, is known as the effective interest rate. It differs from the stated or nominal rate by factoring in compounding periods over a year. For example, a nominal 10% annual interest rate compounded monthly results in…
What Is Effective Rate Brad Ryan, October 16, 2024 The effective rate is the actual rate of return on an investment or loan once the effects of compounding interest are taken into account. For instance, a nominal annual interest rate quoted may not reflect the true cost if interest is compounded more frequently than annually. This represents the actual…