Effective Annual Rate (EAR) Calculator
The Effective Annual Rate (EAR), also known as the Annual Equivalent Rate (AER) or effective interest rate, is the real rate of interest earned or paid on an investment or loan over a year, taking into account the effects of compounding. It's a crucial metric because it allows for a more accurate comparison of financial products with different compounding frequencies.
Unlike the nominal annual interest rate, which doesn't account for how often interest is calculated and added to the principal, the EAR reflects the true return on your investment or the true cost of your borrowing. If interest is compounded more frequently than annually (e.g., monthly, quarterly), the EAR will be higher than the nominal annual rate.
Your Effective Annual Rate (EAR) is: —%
function calculateEAR() {
var nominalRateInput = document.getElementById("nominalRate");
var compoundingPeriodsInput = document.getElementById("compoundingPeriods");
var earValueSpan = document.getElementById("earValue");
var nominalRate = parseFloat(nominalRateInput.value);
var compoundingPeriods = parseFloat(compoundingPeriodsInput.value);
if (isNaN(nominalRate) || isNaN(compoundingPeriods) || compoundingPeriods <= 0) {
earValueSpan.textContent = "Invalid input";
return;
}
// Formula for EAR: EAR = (1 + (nominalRate / 100) / compoundingPeriods) ^ compoundingPeriods – 1
var ratePerPeriod = nominalRate / 100 / compoundingPeriods;
var ear = Math.pow((1 + ratePerPeriod), compoundingPeriods) – 1;
var earPercentage = ear * 100;
earValueSpan.textContent = earPercentage.toFixed(4);
}
.calculator-container {
font-family: sans-serif;
border: 1px solid #ddd;
padding: 20px;
border-radius: 8px;
max-width: 500px;
margin: 20px auto;
box-shadow: 0 2px 4px rgba(0,0,0,0.1);
}
.calculator-container h1 {
text-align: center;
color: #333;
margin-bottom: 15px;
}
.calculator-container p {
color: #555;
line-height: 1.6;
margin-bottom: 20px;
}
.calculator-inputs {
margin-bottom: 20px;
display: flex;
flex-direction: column;
gap: 15px;
}
.input-group {
display: flex;
flex-direction: column;
}
.input-group label {
margin-bottom: 5px;
font-weight: bold;
color: #444;
}
.input-group input[type="number"] {
padding: 10px;
border: 1px solid #ccc;
border-radius: 4px;
font-size: 16px;
}
.calculator-inputs button {
padding: 12px 20px;
background-color: #007bff;
color: white;
border: none;
border-radius: 4px;
font-size: 16px;
cursor: pointer;
transition: background-color 0.3s ease;
}
.calculator-inputs button:hover {
background-color: #0056b3;
}
.calculator-result {
background-color: #e9ecef;
padding: 15px;
border-radius: 4px;
text-align: center;
font-size: 18px;
color: #333;
}
.calculator-result strong {
color: #28a745;
}