APR Calculator
Convert a nominal annual rate into the effective annual rate, taking compounding into account.
Enter your details below.
How to use
- Enter the nominal annual rate as a percentage.
- Choose how often interest compounds.
- Press Calculate to see the effective annual rate.
About this tool
A nominal rate that compounds monthly or daily earns interest on interest during the year, so the true yearly cost is higher than the headline rate. The effective annual rate formula raises the per-period rate to the number of periods in a year and subtracts one, giving the single yearly rate that matches the compounded result.
Frequently asked questions
What is the difference between nominal and effective rates?
The nominal rate is the headline rate before compounding. The effective rate includes the effect of compounding, so it is the rate you actually experience over a full year.
Does more frequent compounding matter much?
At low rates the difference is small, but at high rates daily compounding can push the effective rate noticeably above the nominal rate.