Description
The Excel EFFECT function returns the effective annual interest rate for a given nominal interest rate and number of compounding periods per year.
The format of the function is :
EFFECT( nominal_rate, npery )
where the nominal_rate argument is a numerical value, between 0 and 1, which represents the nominal interest rate, and the npery argument is a positive integer that gives the number of compounding periods per year.
Excel Effect Function Example
Column A of the spreadsheet below, shows examples of the Excel Effect Function, used to calculate the effective annual interest rate for 3 different nominal interest rates and numbers of compounding periods.
The formulas are shown in the spreadsheet on the left and the results are shown in the spreadsheet on the right.
If you get an error from the Excel Effect function this is likely to be one of the following :
Common Errors
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