Is EAR the same as APY?

They are closely related because both express an annual rate after compounding. APY is the regulated deposit-account term in US consumer disclosures; EAR is a broader finance term.

Why is EAR higher than the nominal rate?

When interest compounds more than once per year, interest is earned or charged on prior interest during the same year, so the effective annual rate is higher than the nominal quoted rate.

Does this calculate official APR?

No. APR can include finance charges and disclosure rules. This tool converts nominal rates and compounding frequencies into an effective annual rate.

Effective Annual Rate Calculator

Convert a nominal annual rate and compounding frequency into an effective annual rate, APY-style annual yield, continuous compounding rate, and equivalent nominal APR.

Nominal annual rate (%)

Compounding periods per year

Target effective annual rate (%)

Effective annual rate and compounding

Effective annual rate, often shortened to EAR, converts a nominal annual rate into the annual rate that reflects compounding. In savings contexts this is closely related to APY, while loan APR can involve separate fee-disclosure rules.

Nominal annual rate.
Compounding periods per year.
Effective annual rate after compounding.
Equivalent nominal APR for a target effective annual rate.

Compare like with like

EAR/APY is useful when two products quote similar rates but compound at different frequencies. It does not include account fees, loan finance charges, taxes, or penalties.

EAR formulas

E A R = (1 + \frac{r}{n})^{n} - 1

r is nominal annual rate as a decimal, and n is compounding periods per year.

E A R_{co n t in u o u s} = e^{r} - 1

Continuous compounding is a theoretical benchmark sometimes used in finance.

r_{n o mina l} = n ((1 + E A R)^{1/ n} - 1)

This inverse formula finds the nominal rate that matches a target EAR at a selected compounding frequency.

Frequently Asked Questions

Sources and References

Calculations are based on the listed reference sources. Links open in a new tab.

Updated: June 2, 2026

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