EFFECT
The effective annual rate of a nominal rate compounded a number of times a year.
Group: Financial. Compatible with DAX.
Syntax
EFFECT ( <nominal_rate>, <npery> )| Parameter | Type | Description |
|---|---|---|
nominal_rate | Number | The quoted yearly rate, as a decimal. |
npery | Number | How many times a year interest is added: 12 for monthly, 4 for quarterly. |
Returns
Number. The rate that, added once a year, earns the same as the nominal rate compounded npery times.
Remarks
- It is (1 + nominal_rate / npery) ^ npery − 1.
- The number of periods a year is rounded to a whole number. A rate of 0 or less, or fewer than one period a year, is an error.
Examples
4.5 % a year, compounded more and more often
EVALUATE
ROW (
"Quarterly", EFFECT ( 0.045, 4 ),
"Monthly", EFFECT ( 0.045, 12 ),
"Daily", EFFECT ( 0.045, 365 )
)| Quarterly | Monthly | Daily |
|---|---|---|
| 0.0457650863305663 | 0.0459398250405896 | 0.0460249584986061 |