EAR Calculator
Convert nominal annual rate to effective annual rate (EAR). Compare interest rates with different compounding frequencies: monthly, quarterly, daily.
Effective annual rate (EAR)
12.6825%
Equivalent to 12% nominal compounded 12 times per year.
Formula
EAR = (1 + nominal/n)n − 1
n = compounding periods per year (12). Use EAR to compare offers with different compounding (e.g. monthly vs quarterly).
What is EAR (Effective Annual Rate)?
The effective annual rate (EAR) is the real return you get after accounting for compounding. A 12% nominal rate compounded monthly is not the same as 12% compounded once a year. EAR lets you compare loans and investments on an equal footing.
Formula: EAR = (1 + r/n)n − 1, where r is the nominal annual rate (as a decimal) and n is the number of compounding periods per year.
When to use EAR
Use EAR when comparing savings accounts, loans, or bonds that compound at different intervals (monthly vs quarterly vs daily). The nominal rate alone can be misleading—always convert to EAR for a fair comparison.
APR (annual percentage rate) is often quoted as a nominal rate. Converting APR to EAR shows the true cost or return when interest is compounded more than once per year.