Effective Annual Interest Rate financial definition of Effective Annual Interest Rate. Effective Annual Interest Rate finance term by the Free Online Dictionary.

Effective annual interest rate

An annual measure of the time value of money that fully reflects the effects of compounding.

Effective Interest Rate

The interest rate on a debt or debt security that takes into account the effects of compounding. For example, if one has a fixed-income investment such as certificate of deposit that pays 3% in interest each month, the effective interest rate is more than 3% because compounding the interest results in a (slightly) greater principal each month on which the interest rate is calculated. In this example, the effective interest rate rate is calculated thus:

Effective interest rate = (1 + .03/12)^12 - 1 = .0304 = 3.04%, where .03 is the simple interest rate and 12 is the number of times in a year interest is compounded. It is also known as the annual effective rate or the annual equivalent rate. See also: Stated annual interest rate, annual percentage yield.

Effective Annual Interest Rate

What Does Effective Annual Interest Rate Mean?

The annual rate of interest of an investment when compounding occurs more often than once a year. It is calculated as follows:

Investopedia explains Effective Annual Interest Rate

Consider a stated annual rate of 10%. Compounded yearly, this rate will turn $1,000 into $1,100. However, if compounding occurs monthly, $1,000 will grow to $1,104.70 by the end of the year, for an effective annual interest rate of 10.47%. Basically, the effective annual rate is the annual rate of interest that accounts for compounding.

Related Terms:
• Annual Percentage Yield
• Compounding
• Coupon
• Fixed-Income Security
• Interest Rate

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Stated Annual Interest Rate	The effective annual interest rate on an RAL can be quite high, given that the RAL fee is in effect an interest charge for the two- or three-week period that it would otherwise take to receive the refund. Electronic filing - it's in everyone's future by Sarasota, Thomas W. / The Tax Adviser The debt was structured as a $4 million non-interest bearing debenture with a 25% original issue discount, which, if it reaches maturity, equates to an effective annual interest rate of approximately 8% per annum. Drinks Americas Closes Private Placement for Cash Infusion of Up to ... by Business Wire Unfortunately, most consumers do not realize they are actually taking out a loan with an effective annual interest rate of up to 700% Consumer Alert: Refund Anticipation Loans...Reward or Rip-Off? by Business Wire	ECV EDC EDGAR EDGAR Electronic Data Gathering, Analysis and Retrieval System Edge Act Edge Act Corporation Edge Corporations Edgy EDI Edict Education Expense Education IRA Education Savings Account Educazione continua Edward George EE EEC EEK Efecto de desplazamiento Efecto riqueza Efectos comerciales en eurodivisas Efeito de expulsao Efeito riqueza Effectifs personnel effective age Effective Annual Interest Rate Effective Annual Yield Effective call price Effective convexity effective date Effective Debt Effective duration effective gross income effective interest rate Effective Margin Effective Net Worth effective procuring cause Effective Rate Effective Rate of Interest effective rental rate Effective Sale effective spread Effective Tax Rate effective yield Effet d'eviction Effet de commerce en eurodevises Effet de patrimoine Effeto di comodo Effets publics Effetto Effetto alone	effected effected by choice effecter effecter effecter effecter effectible effectible effectible effectible Effectifs personnel effecting effecting effecting effecting effectio Effection effective effective effective effective effective Effective Actions Per Minute Effective Active Acoustics Simulation Effective Address Effective Address effective age effective air path effective ampere effective angle of attack Effective Annual Interest Rate Effective Annual Interest Rates Effective annual rate Effective Annual Rates Effective annual yield Effective annual yield Effective Annual Yields Effective Annualized Rate effective antenna length Effective Anterograde Refractory Period effective aperture effective area effective area of reinforcement Effective Arterial Blood Volume Effective Arterial Volume effective atmosphere Effective Atmospheric Angular Momentum Effective atomic number Effective atomic number Effective Automation Gains Efficiency Results Effective Availability Factor Effective Average Tax Rate Effective Axial Stiffness of the Body Effective Balloon Dilating Area to Body Surface Area Effective Balloon Dilating Diameter effective bandwidth effective before

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Stated Annual Interest Rate

The effective annual interest rate on an RAL can be quite high, given that the RAL fee is in effect an interest charge for the two- or three-week period that it would otherwise take to receive the refund.

Electronic filing - it's in everyone's future by Sarasota, Thomas W. / The Tax Adviser

The debt was structured as a $4 million non-interest bearing debenture with a 25% original issue discount, which, if it reaches maturity, equates to an effective annual interest rate of approximately 8% per annum.

Drinks Americas Closes Private Placement for Cash Infusion of Up to ... by Business Wire

Unfortunately, most consumers do not realize they are actually taking out a loan with an effective annual interest rate of up to 700%

Consumer Alert: Refund Anticipation Loans...Reward or Rip-Off? by Business Wire

ECV

EDC

EDGAR

EDGAR Electronic Data Gathering, Analysis and Retrieval System