EFFECT

Definition: EFFECT is a function that returns the effective annual interest rate based on a nominal interest rate and the number of compounding periods per year.

Syntax: =EFFECT(nominal_rate, npery)

Situation: This formula is suitable when you need to find the effective annual interest rate based on a nominal interest rate and the number of compounding periods per year.

Example: If you have a nominal interest rate of 5% compounded monthly, the effective annual interest rate can be found using the formula =EFFECT(0.05, 12), which returns 5.116%.