EAR Calculator

Calculate the Effective Annual Rate (EAR) to compare different financial products with varying compounding frequencies. Make informed decisions about loans and investments.

✓ APR to EAR Conversion ✓ Multiple Compounding ✓ Rate Comparison

EAR Calculation

Single Rate Analysis

Annual Percentage Rate

How often interest compounds

Rate Comparison

Option 1

Option 2

Option 3

EAR Formula

EAR = (1 + r/n)^n - 1
Where:
EAR = Effective Annual Rate
r = Nominal rate (APR)
n = Compounding frequency
Continuous: EAR = e^r - 1

Common Scenarios

Credit Card
18% APR, Monthly compounding
Savings Account
2.5% APR, Daily compounding
Mortgage
6% APR, Monthly compounding

Compounding Frequencies

Annually: 1 time/year
Semi-annually: 2 times/year
Quarterly: 4 times/year
Monthly: 12 times/year
Weekly: 52 times/year
Daily: 365 times/year

EAR vs APR

APR (Annual Percentage Rate)
Simple interest rate without compounding effects
EAR (Effective Annual Rate)
True annual rate including compounding effects

When to Use EAR

✓ Comparing different loan offers
✓ Evaluating investment returns
✓ Choosing between savings accounts
✓ Understanding true cost of credit
✓ Financial planning decisions
Advertisement

Understanding EAR

The Effective Annual Rate (EAR) represents the true annual interest rate that accounts for the effects of compounding over a given period.

  • True Cost: Shows the actual annual cost or return
  • Compounding Effect: Includes the impact of compound interest
  • Comparison Tool: Enables fair comparison between different rates
  • Decision Making: Helps choose the best financial product

EAR Applications

Loan Comparison

Compare loans with different APRs and compounding frequencies to find the lowest true cost.

Investment Analysis

Evaluate investment returns that compound at different frequencies for accurate comparison.

Savings Optimization

Choose savings accounts with the highest effective return, considering compounding frequency.

Financial Planning

Use EAR for accurate financial projections and retirement planning calculations.