Effective Interest Rate Calculator
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.
Effective Annual Rate (EIR)
7.186%
Frequently Asked Questions
What is Nominal vs Effective Interest Rate?
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.
Why does compounding frequency matter?
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.
What frequency do banks use for Fixed Deposits (FDs)?
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.