Equivalent Rate Calculator - AER

Calculate the Annual Equivalent Rate (AER) to fairly compare financial products with different interest rates and compounding frequencies. Find the true equivalent rate for informed decisions.

✓ Fair Comparison ✓ Multiple Products ✓ True Equivalent Rate

AER Calculation & Comparison

Single Rate Conversion

Stated annual rate

How often it compounds

Target compounding frequency

Multi-Product Comparison

Product A

Product B

Product C

Product D

AER Formula

AER = (1 + r/n)^n - 1
Where:
AER = Annual Equivalent Rate
r = Nominal interest rate
n = Compounding frequency
Continuous: AER = e^r - 1

Common Scenarios

Savings Accounts
Compare different savings products
Investment Products
Compare bonds and CDs
Loan Comparison
Compare borrowing costs

Rate Types

Nominal Rate: Stated annual rate
AER: True annual rate with compounding
APY: Annual Percentage Yield
EAR: Effective Annual Rate
Real Rate: Adjusted for inflation

Compounding Impact

✓ More frequent = higher effective rate
✓ Daily compounding ≈ continuous
✓ Impact increases with rate level
✓ Marginal benefit decreases
✓ Consider fees and restrictions

When to Use AER

✓ Comparing savings accounts
✓ Evaluating investment options
✓ Choosing between CDs
✓ Loan rate comparison
✓ Financial product analysis
✓ Investment planning
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Understanding AER

The Annual Equivalent Rate (AER) shows what the interest rate would be if interest was paid and compounded once each year, allowing fair comparison between products.

  • Fair Comparison: Standardizes different compounding frequencies
  • True Rate: Shows the actual annual return or cost
  • Compounding Effect: Includes the impact of compound interest
  • Decision Tool: Helps choose the best financial product

AER Applications

Product Comparison

Compare savings accounts, CDs, and investment products with different compounding schedules.

Investment Analysis

Evaluate the true return of different investment options to maximize your earnings.

Loan Shopping

Compare the true cost of loans with different interest calculation methods.

Financial Planning

Make informed decisions by understanding the real impact of compounding on your finances.