Easy Explanation Notes with Examples

EFFECT function in Excel

Use

The EFFECT function calculates an effective annual interest rate for a loan or an investment if the compounding periods per year along with the nominal interest rate are given. The function is one of the Financial functions,  often used to make the comparison between loans with different compounding periods.

Syntax

EFFECT(nominal_rate, npery)

The EFFECT function has the followings arguments:

nominal_rate – The nominal interest rate per year.

npery – The number of compounding periods per year.

Example

Result:

To change the result format into a percentage, press Alt, H then P.

For more detail and examples on the EFFECT function, visit Microsoft Office Website.

Function Errors

Error Occurs
#VALUE! If any supplied argument is nonnumeric.
#NUM! If nominal_rate ≤ 0 or if npery < 1

Related Function

NOMINAL function calculates the nominal interest rate of a bond having an effective interest rate and compounding periods per year.




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