Effective Annual Interest Rate

Posted in Finance, Accounting and Economics Terms, Total Reads: 1676

Definition: Effective Annual Interest Rate

It is     Total Interest expense for the year

                    Total outstanding liabilities

Where compounding occurs more than once in a year, then the effective annual interest rate is denoted as:

(1+i/n)n – 1

Here n= number of periods of compounding

        i= nominal interest rate given

All the interest rates are annualized such that there is common comparison among the securities.


Browse the definition and meaning of more terms similar to Effective Annual Interest Rate. The Management Dictionary covers over 7000 business concepts from 6 categories. This definition and concept has been researched & authored by our Business Concepts Team members.

Search & Explore : Management Dictionary

Share this Page on:
Facebook ShareTweetShare on Linkedin