Read the formula and variables
m equal periods together form one year and the annual growth factor is positive.
| Input | Meaning |
|---|---|
| EAR | Effective annual rate |
| m | Equal periods per year |
| r_period | Effective rate for one of those periods |
Check a stated example
At 6% EAR, a monthly effective rate is approximately 0.4867550565%, not 0.5%.
The amounts in the example are synthetic. Keep the original precision through the calculation and round only the displayed result.
Check the domain and timing
Raising the monthly factor to the twelfth power recovers the 1.06 annual factor.
A changed date, payment pattern or quotation convention can require a different expression even when the numbers look similar. Identify those features before calculating.