Effective Annual Rate (EAR) Calculator

💰 How This Calculator Works

Converts a nominal annual rate (APR) to the Effective Annual Rate (EAR/APY) by accounting for compounding frequency.

🔢 Worked Examples

• 6% nominal monthly → EAR = 6.168%
• 5% daily → EAR = 5.127%
• 10% semi-annual → EAR = 10.25%

📋 Common Use Cases

Interest calculators cover compound interest, simple interest, and time-value-of-money concepts. Understanding the difference between nominal and effective rates — and how compounding frequency affects returns — can mean thousands of dollars difference over a savings or investment horizon.

• Comparing savings account yields by compounding frequency
• Computing the true annual rate from a monthly-quoted rate
• Projecting investment growth under different return assumptions
• Understanding the "Rule of 72" for doubling time

💡 Did You Know?

Daily compounding at 5% annual grows money to 5.127% effective rate. Compounding matters more the longer you invest — the difference between annual and daily compounding on a 30-year $10,000 investment is over $1,500.

⚠️ Common Mistake

Comparing credit card APR (nominal) with savings account APY (effective) directly — always convert both to the same basis before comparing.