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NOMINAL
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 per cent sign (for example, 8%).
num-periods-year: The number of compounding periods per year. num-periods-year must be greater than 0.
Examples |
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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 semi-annual 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. |