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.

Effective cost of funding=[(1+foreign interest rate)(1+forward premium)]-1

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.

derivation of this formula r=(1+i/m)m-1

It is 1.135^2 - 1 = 28.8%