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An effective interest rate is an actual amount of interest that is paid on a loan or investment vehicle. It differs from the Annual Percentage Rate.It takes into account the concept of compound interest.It is commonly used to calculate the total amount that will accumulate or will need to be repaid on bank accounts or when repaying revolving credit card accounts.
Wiki User
∙ 11y ago
Wiki User
∙ 11y agothe true rate of return
considering all relevant financing expenses .
Example: Abel borrows $10,000 on a one-year bank loan. He pays 2 discount points and a 7% face interest rate . He repays the loan at the end of the year, with interest. Since he really received only $9,800 at the start of the loan and repaid $10,700, the effective rate was greater than 7%. It was approximately 9.2%.
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How do you rate a starmovie?
To rate a starmovie, you decide what you thought about it. You rate it based on interest, acting, and overall themes and effects. You can rate it through their rating program.
How interest rate affect the value of us dollar?
its actually the other way around. the value of the us dollar effects interest rates. the lower the us dollar is worth, the lower the interest rate
What is nominal interest?
Nominal InterestA nominal interest rate is the interest rate that does not compensate for inflation. This is used in relation to "effective interest rate" or "real interest rate."" Real Interest Rate = Nominal Interest Rate - Inflation Rate " Improvement suggested by Palash Bagchi.
What does the nominal interest rate mean?
A nominal interest rate is an interest rate that does not factor in the rate on inflation. Nominal interest rate could also refer to an interest rate that does not adjust for the full effect of compounding.
How does the real interest rate relate to the nominal interest rate?
A real interest rate and a nominal interest rate are quite similar. The only real difference between the two interest rates are that a nominal interest rate include the cost of inflation where as the real interest rate does not.
What is the formula to calculate monthly interest rate if the annual interest rate is known?
Annual Interest Rate divided by 12= Monthly Interest Rate
What does nominal interest rates means?
A nominal interest rate is an interest rate that does not factor in the rate on inflation. Nominal interest rate could also refer to an interest rate that does not adjust for the full effect of compounding.
How do you convert annual interest rate to monthly?
Let i = annual rate of interest. Then i' = ((1+i )^(1/12))-1 Where i' = monthly rate of interest
What is the Formula for simple interest rate?
The answer for rate in simple interest is =rate= simple interest\principle*time
What does effective interest rate mean?
An effective annual interest rate considers compounding. When the principle is compounded multiple times each year the interest rate increased to be more than the stated interest rate. The increased interest rate is the effective annual interest rate.
What is compounding rate?
Compounding rate is the interest rate at which the rate grow faster than the simple interest on deposit or loan made. It is also said "interest on interest".
What is a good interest rate on a 15 year mortgage?
Any interest rate below 5% is a favorable rate currently. This interest rate is a competitive rate.
