The NOMINAL function returns the nominal annual interest rate from the effective annual interest rate based on the number of compounding periods per year. Both arguments are number values.
NOMINAL(effective-int-rate, num-periods-year)
effective-int-rate: The effective interest rate of a security. effective-int-rate is entered as a decimal (for example, 0.08) or with a percent sign (for example, 8%).
num-periods-year: The number of compounding periods per year. num-periods-year must be greater than 0.
Examples |
|---|
The nominal interest rate will vary from the effective rate, depending on the way interest is compounded. For the following examples, suppose a savings account with an effective rate of interest (effective-int-rate) as stated. Note that in all cases, the nominal rate of interest is 5.00%. =NOMINAL(0.0513, 365) returns approximately 5.00309221810813%, the nominal annual interest rate if the effective rate of 5.13% was based on daily compounding (num-periods-year is 365). =NOMINAL(0.0512, 12) returns approximately 5.00363980482339%, the nominal annual interest rate if the effective rate of 5.12% was based on monthly compounding. =NOMINAL(0.0509, 4) returns approximately 4.99563208794154%, the nominal annual interest rate if the effective rate of 5.09% was based on quarterly compounding. =NOMINAL(0.0506, 2) returns approximately 4.9975609611002%, the nominal annual interest rate if the effective rate of 5.06% was based on semiannual compounding. =NOMINAL(0.0500, 1) returns approximately 5%, the nominal annual interest rate if the effective rate of 5.00% was based on annual compounding. |