An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following:
Investopedia Says:
Consider a stated annual rate of 10%. Compounded yearly, this rate will turn $1000 into $1100. However, if compounding occurs monthly, $1000 would grow to $1104.70 by the end of the year, rendering an effective annual interest rate of 10.47%. Basically the effective annual rate is the annual rate of interest that accounts for the effect of compounding.
Related Links:
Understand the various factors that influence them so you can learn to anticipate their movements for profit. Trying To Predict Interest Rates
Get a deeper understanding of the importance of interest rates and what makes them change. Forces Behind Interest Rates
We go over the impact it can have on your spending money AND your investment returns! Understanding Credit Card Interest
