EFFECT

float effect(date nominal_interest_rate, integer compounding_periods_per_year)

Returns the effective annual interest rate.

nominal_interest_rate > 0 is the nominal annual interest rate.

compounding_periods_per_year >= 1 is the number of times in a whole year that interest is added to the principal.

The nominal and effective interest rates are related by the equation

effect = -1 + (1 + nominal / compounding_periods_per_year)^compounding_periods_per_year

Example

=effect(2.5%, 4)

» 2.524%.