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This calculator is for informational purposes only. Always confirm final terms, fees, and taxes with your financial institution or advisor.
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FAQ
How do you calculate the effective annual rate (EAR)?
EAR is calculated as (1 + i)^n - 1, where i is the periodic rate and n is the number of compounding periods per year. For example, with a 5% APR compounded monthly, i = 0.05 / 12 and EAR = (1 + i)^{12} - 1.
How are monthly and daily rates derived?
We start from the EAR and compute monthly as (1 + EAR)^{1/12} - 1 and daily as (1 + EAR)^{1/days} - 1. You can select 365-day actual or a 360-day banking convention for the daily calculation.
What is the difference between APR and EAR (APY)?
APR is a nominal annual rate that does not fully reflect intra-year compounding. EAR (effective annual rate) includes compounding, so for the same APR, higher compounding frequency leads to a higher EAR. APY is often used similarly to EAR, but exact definitions can vary by country or product disclosures.
When should I use 365 vs 360 for the daily basis?
The daily equivalent rate depends on an assumed day count. 365 days is a common “actual” basis, while 360 days is used in some banking conventions. Use the basis stated in the product terms so comparisons remain consistent.
How it works
Definitions
- APR (nominal): annual rate label that does not directly include intra-year compounding.
- EAR (effective): the equivalent annual rate that reflects compounding.
- rp: rate per period (monthly, daily, etc.).
Formulas
- EAR = (1 + APR/m)m − 1 (m compounding periods per year)
- Monthly = (1 + EAR)1/12 − 1; Daily = (1 + EAR)1/D − 1 (D=365 or 360)
- APR = m · ((1 + EAR)1/m − 1)
Quick check
Example: APR 5% with m=12 → EAR ≈ 5.116%; monthly ≈ 0.417%.
Note
This tool does not include fees, taxes, or product-specific rounding rules. Use it for rate comparisons.
Last updated: 2025-11-07