EFFECT Function in Google Sheets

Calculate the effective annual interest rate using the EFFECT function.

EFFECT Function

The EFFECT function in Google Sheets calculates the effective annual interest rate given a nominal interest rate and the number of compounding periods per year.

Syntax

EFFECT(nominal_rate, periods_per_year)
  • nominal_rate: The nominal interest rate per year. This is a required parameter.
  • periods_per_year: The number of compounding periods per year. This is a required parameter.

Examples

  1. Calculate Effective Annual Rate

Calculate the effective annual interest rate for a nominal rate of 5% compounded quarterly:

=EFFECT(0.05, 4)

This will output 5.0945%.

Notes

  • The EFFECT function is particularly useful for comparing interest rates with different compounding periods.
  • Ensure that the nominal rate and periods per year are consistent with the financial product being evaluated.
  • NOMINAL: Calculate the nominal interest rate given the effective rate and the number of compounding periods.