The usage rate actually paid by the borrower on a loan is termed as the effective interest rate. This rate may vary depending on various factors like the actual loan amount, the debt amount, and the amount paid by the investor on debt.
Effective Interest Rate Calculator allows you to effectively calculate the effective period interest rates and effective annual interest rates.
Formula for Effective Interest Rate:
R = [1 + (i/n)]n – 1
R = Effective interest rate
i = Nominal annual interest rate
n = Number of compounding periods per year
The effective annual interest rate has its own importance because it helps to calculate the true return on investment. It plays an important role in determining which investment offers the highest rate of return.
Use Effective Interest Rate Calculator and get rid of complex calculations.