Effective Annual Yield Calculator

How to Use the Calculator

1. Enter the Nominal Annual Interest Rate in the first input field. This is the stated interest rate before accounting for compounding.
2. Enter the Number of Compounding Periods per Year in the second input field. This is how many times the interest is compounded in a year (e.g., 12 for monthly compounding).
3. Click the Calculate button to compute the Effective Annual Yield.
4. The result will be displayed in the Effective Annual Yield (%) field.

Understanding Effective Annual Yield (EAY)

Effective Annual Yield (EAY) is the actual annual rate of return taking into account the effect of compounding interest. It is useful for comparing investments with different compounding periods.

Example

If you have a nominal annual interest rate of 5% compounded monthly (12 times per year), the EAY would be calculated as:

EAY = (1 + (0.05 / 12)) ^ 12 - 1 ≈ 0.05116 or 5.116%

When to Use This Calculator

• When comparing different investment options with varying compounding frequencies.
• When evaluating the true cost of borrowing with different compounding periods.
• For financial analysts and investors to make informed decisions based on accurate yield calculations.