Finance

EAR Calculator (Effective Annual Rate)

Convert a nominal (stated) interest rate to the Effective Annual Rate accounting for compounding.

Nominal (Stated) Rate (%)

Compounding Frequency

Formula:
EAR = (1 + r/n)^n − 1
Continuous: EAR = e^r − 1
Where r = nominal rate, n = compounding periods/yr

Why EAR Matters

Banks often quote nominal rates with different compounding frequencies. EAR normalizes them for comparison. A 12% rate compounded monthly is actually 12.68% EAR — more than 12% compounded annually.