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About
The annual equivalent rate (AER) is the interest rate on a financial product that has more than one compounding frequency in a year. It is used to compare interest rates among loans or financial investments with different compounding frequencies, such as yearly, quarterly, half-yearly, monthly, weekly, and daily.
AER is the actual rate of interest caused by the impacts of compounding frequency. The AER will always be higher than the nominal rate or the stated rate when the compound is included.
The formula for calculating annual equivalent rate (AER) is as follows:
First calculate annual equivalent rate, AER = (1 + r / c)c - 1
after calculate equivalent interest rate, EIR = z * [(1 + r / c)(c/z) - 1]
Where
- r - nominal annual interest rate
- c - starting compound frequency
- z - new compound frequency
What can you do with Equivalent Rate Calculator?
- It helps to calculate anuual equivalent rate (AER) and equivalent interest rate and helps to project your future interest earnings.
- Users can see the accurate value of the AER and equivalent interest rate.
- This calculator helps to share your calculations by URL.