- Effective Annual Interest Rate
- An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following:
Consider a stated annual rate of 10%. Compounded yearly, this rate will turn $1000 into $1100. However, if compounding occurs monthly, $1000 would grow to $1104.70 by the end of the year, rendering an effective annual interest rate of 10.47%. Basically the effective annual rate is the annual rate of interest that accounts for the effect of compounding.

*Investment dictionary.
Academic.
2012.*

### Look at other dictionaries:

**Effective annual interest rate**— An annual measure of the time value of money that fully reflects the effects of compounding. The New York Times Financial Glossary … Financial and business terms**effective annual interest rate**— An annual measure of the time value of money that fully reflects the effects of compounding. Bloomberg Financial Dictionary … Financial and business terms**Stated Annual Interest Rate**— The return on an investment that is expressed as a per year percentage, and that does not account for compounding that occurs throughout the year. The effective annual interest rate, on the other hand, does account for intra year compounding that … Investment dictionary**effective annual rate**— UK US noun [C] (also effective annual interest rate) ► FINANCE the actual rate of interest paid or charged over one year: »The effective annual rate is the amount of interest charged on an overdraft, not including any fees or charges … Financial and business terms**Annual percentage rate**— Parts of total cost and effective APR for a 12 month, 5% monthly interest, $100 loan paid off in equally sized monthly payments. The term annual percentage rate (APR), also called nominal APR, and the term effective APR, also called EAR,[1]… … Wikipedia**Effective interest rate**— The effective interest rate, effective annual interest rate, Annual Equivalent Rate (AER) or simply effective rate is the interest rate on a loan or financial product restated from the nominal interest rate as an interest rate with annual… … Wikipedia**Interest rate**— Finance Financial markets Bond market … Wikipedia**Interest rate swap**— An interest rate swap is a derivative in which one party exchanges a stream of interest payments for another party s stream of cash flows. Interest rate swaps can be used by hedgers to manage their fixed or floating assets and liabilities. They… … Wikipedia**interest rate**— The percentage of an amount of money which is paid for its use for a specified time. Commonly expressed as an annual percentage rate (APR). Federal and state laws regulate interest rate amounts and disclosures on consumer loans. See annual… … Black's law dictionary**interest rate**— The percentage of an amount of money which is paid for its use for a specified time. Commonly expressed as an annual percentage rate (APR). Federal and state laws regulate interest rate amounts and disclosures on consumer loans. See annual… … Black's law dictionary