Nominal Compound Interest Formula. Suppose if the effective interest rate or apy is 8 25 compounded monthly then the nominal annual interest rate or stated rate will be about 7 95. The effective interest rate is calculated as if compounded annually half yearly monthly or daily.
The formula for compound interest is p 1 r n nt where p is the initial principal balance r is the interest rate n is the number of times interest is compounded per time period and t is the number of time periods. The effective interest rate is calculated as if compounded annually half yearly monthly or daily. Suppose if the effective interest rate or apy is 8 25 compounded monthly then the nominal annual interest rate or stated rate will be about 7 95.
The effective interest rate is calculated as if compounded annually half yearly monthly or daily.
It s quite complex because it takes into consideration not only the annual interest rate and the number of years but also the number of times the interest is compounded per year. Let s come up with a formula to work out the effective annual rate if we know. Compound interest or interest on interest is calculated with the compound interest formula. Compound interest or interest on interest is calculated with the compound interest formula.
