EFFECT Function in Excel: Real Annual Rate With Compounding

⏱ 1 min readUpdated 28 September 2026

FinancialLevel: ExpertAvailable in: Excel 2007+

In this article
  1. Syntax
  2. Examples
  3. Example 1
  4. Related functions

EFFECT converts a nominal annual rate into the effective rate after compounding. NOMINAL does the reverse.

Syntax

=EFFECT(nominal_rate, npery)
Argument What it means
npery Compounding periods per year (4 for quarterly FDs).

Examples

Example 1

=EFFECT(7%, 4)

A 7% FD compounded quarterly yields about 7.19% a year.

NOMINAL · RATE

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