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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.

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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.

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A stated interest rate is the rate that is available when you are applying. An effective interest rate is the rate that has been applied to the loan. The true cost of borrowing is the effective interest rate.

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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.

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The new interest rate due to the impact of the total fees is 13.233 % which translates into an effective interest rate of 13.6708 % due to semi-annual compounding.

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Only on Tuesdays.

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