What is my effective interest rate?
Type a stated interest rate and how often it compounds to see the effective interest rate for a year. Or type an effective rate to find the stated rate behind it.
- Effective annual rate (EAR)
- 6.168%
A stated rate of 6% compounded monthly is an effective annual rate of 6.168%.
Effective annual rate (EAR): 6.168%. A stated rate of 6% compounded monthly is an effective annual rate of 6.168%.
The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use
How to calculate
Converts a stated (nominal) interest rate to its effective annual rate for daily, monthly, quarterly, twice-yearly, yearly or continuous compounding, and back.
Example with the default inputs (Stated interest rate 6%, Interest is compounded monthly): A stated rate of 6% compounded monthly is an effective annual rate of 6.168%.
Formula: EAR = (1 + r ÷ n)^n − 1, where r is the stated yearly rate and n the times interest is compounded a year; EAR = e^r − 1 for continuous compounding. Back: r = n × ((1 + EAR)^(1/n) − 1), or ln(1 + EAR).
- The stated rate stays the same for the whole year, and interest is added to the balance at each compounding.
- Daily compounding uses 365 days a year.
- No fees. For a savings account the effective annual rate is the annual percentage yield (APY).
Worked examples
Each example is checked against the calculator on every build.
- Stated interest rate 6%, Interest is compounded monthly gives Effective annual rate (EAR) 6.167781%.Source: Regulation DD (Truth in Savings), 12 CFR part 1030, appendix A, Part I ($61.68 of interest on $1,000 for a 365-day year is an annual percentage yield of 6.17%). https://www.law.cornell.edu/cfr/text/12/appendix-A_to_part_1030, retrieved 2026-10-02
- Stated interest rate 12%, Interest is compounded quarterly gives Effective annual rate (EAR) 12.550881%.
- Stated interest rate 18%, Interest is compounded daily gives Effective annual rate (EAR) 19.716424%.
- Effective annual rate (EAR) 10%, Interest is compounded monthly gives Stated interest rate 9.568969%.
- Stated interest rate 5%, Interest is compounded continuously gives Effective annual rate (EAR) 5.12711%.
How it works
EAR = (1 + r ÷ n)^n − 1
- r is the stated (nominal) yearly interest rate as a decimal: 6% is 0.06.
- n is the times a year interest is compounded: 365 for daily, 12 for monthly, 4 for quarterly, 2 for twice a year, 1 for yearly.
- For continuous compounding, EAR = e^r − 1.
Type the stated rate to get the effective rate, or type the effective rate to get the stated rate: r = n × ((1 + EAR)^(1/n) − 1), or r = ln(1 + EAR) for continuous compounding.
Rules
- The stated rate is from 0% to 100% and the effective rate from 0% to 200%. A rate worked out past its limit gives no answer.
- Daily compounding uses 365 days a year. No fees are included.
- The page uses the same formula and choices as the APY calculator; for a deposit the effective annual rate is the APY.
Output format. Rates are shown in percent to 3 decimal places; the page keeps the full double-precision value.
Worked examples by hand
6% compounded monthly. (1 + 0.06 ÷ 12)^12 − 1 = 1.005^12 − 1 = 6.1678%. On $1,000 that is $61.68 of interest in a year, Regulation DD's example.
12% compounded quarterly. (1 + 0.12 ÷ 4)^4 − 1 = 1.03^4 − 1 = 1.12550881 − 1 = 12.5509%.
18% compounded daily. (1 + 0.18 ÷ 365)^365 − 1 = 19.7164%.
Effective 10%, monthly. 12 × (1.10^(1/12) − 1) = 12 × 0.0079741 = 9.5690%.
5% compounded continuously. e^0.05 − 1 = 5.1271%.
Other questions people ask
What is the effective interest rate?
The rate you actually earn or pay in a year once compounding is counted: interest earned on earlier interest. A 6% rate compounded monthly earns 6.168% in a year, so its effective annual rate (EAR) is 6.168%.
How do I calculate the effective annual rate?
EAR = (1 + r ÷ n)^n − 1, where r is the stated yearly rate as a decimal and n is how many times a year interest is compounded. For 12% compounded quarterly: (1 + 0.12 ÷ 4)^4 − 1 = 1.03^4 − 1 = 12.551%.
Is the effective interest rate the same as APY?
For a savings account, yes: the annual percentage yield (APY) that banks must show under Regulation DD is the effective annual rate of the account. The same formula applies to a loan, where it shows what the stated rate really costs in a year.
Is the effective interest rate the same as APR?
No. The APR on a loan is a yearly rate without compounding (and includes some fees). A credit card with an 18% APR that compounds daily has an effective annual rate of about 19.72%.
How do I find the stated rate from an effective rate?
Reverse the formula: r = n × ((1 + EAR)^(1/n) − 1). An effective rate of 10% with monthly compounding needs a stated rate of 12 × (1.10^(1/12) − 1) = 9.569%.
What does continuous compounding give?
The limit of compounding more and more often: EAR = e^r − 1. At 5% this is 5.1271%, only a little more than the 5.1267% of daily compounding.