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Discover the true Annual Percentage Yield (APY) when accounting for compounding frequency. Compare advertised "Nominal" rates to actual "Effective" returns.
The advertised or stated rate.
7.186%
The Nominal Rate is the stated or advertised interest rate (e.g., '7% per annum'). The Effective Interest Rate (EIR) or Annual Percentage Yield (APY) takes compounding times into account to show you the *actual* amount of interest you will earn in one year.
The more frequently interest is calculated and added to your principal, the higher your actual yield. For example, a 7% rate compounded daily will make you more money in a year than a 7% rate compounded annually.
In India, banks almost universally compound Fixed Deposits on a 'Quarterly' basis (4 times a year). Savings accounts are typically calculated daily but credited quarterly.