Returns the net annual interest rate for a nominal interest rate.
Nom is the nominal interest.
P is the number of interest payment periods per year.
Nominal interest refers to the amount of interest due at the end of a calculation period. Effective interest increases with the number of payments made. In other words, interest is often paid in installments (for example, monthly or quarterly) before the end of the calculation period.
If the annual nominal interest rate is 9.75% and four interest calculation periods are defined, what is the actual interest rate (effective rate)?
=EFFECT(9.75%;4) = 10.11% The annual effective rate is therefore 10.11%.