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Jinsi ya kukokotoa Effective Annual Rate

Effective Annual Rate ni nini?

Effective Annual Rate (EAR), also called Annual Equivalent Rate (AER), is the actual annual interest rate accounting for compounding within the year. It allows comparison of loans or investments with different compounding frequencies.

Mwongozo wa Hatua kwa Hatua

  1. 1EAR = (1 + r/n)^n − 1
  2. 2r = nominal (stated) annual rate, n = compounding periods per year
  3. 3Daily compounding always gives a higher EAR than monthly, which is higher than annual
  4. 4APY (Annual Percentage Yield) on savings accounts IS the EAR

Mifano Iliyotatuliwa

Ingizo
12% nominal, monthly compounding
Matokeo
EAR = 12.68%
(1 + 0.12/12)^12 − 1
Ingizo
12% nominal, daily compounding
Matokeo
EAR = 12.75%
(1 + 0.12/365)^365 − 1

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