Effective Annual Yield Rate Converter
This calculator determines the effective annual yield rate (EAY), which reflects the true return on an investment when interest is compounded more than once per year. It's essential for comparing different interest-bearing products on an equal basis.
Effective Annual Interest Rate Calculator
Effective Annual Yield Formula
Where:
- $$i$$ = effective annual yield rate
- $$r$$ = nominal annual interest rate (decimal)
- $$n$$ = number of compounding periods per year
The effective annual yield (also called effective annual rate or annual equivalent rate) accounts for the impact of compounding within the year. It allows investors and borrowers to compare financial products with different compounding frequencies by expressing the annual return or cost as a single percentage. This is particularly useful when evaluating savings accounts, loans, and bonds.